CSL Acquisition Proposal Explanatory Booklet

Schemes of Arrangement and Special Distribution in relation to a recommended proposal from CSL Limited (ACN 051-588-348).

The Notice of Share Scheme Meeting, Notice of General Meeting and Notice of Ordon Scheme Meeting are included in Sections 10: 11 and 12 respectively of this Explanatory Booklet A proxy form for the Share Scheme Meeting and the General Meeting accompanies into Explanatory Rocket (Aproxy form for the Option Scheme Meeting is also enclosed if you are an Optionholder.)

Your yote is important in determining whether the CSL Acquisition Ployis at a second

You Director Unahlmothy decannented that you vote in Avour of all resolutions relating to the CSI. Acquisition Proposal, in the absence. of a more favourable proposal from another party.

This is an important document and requires your urgent attention. If you are in any doubt as to how to deal with it, please consult your legal. Inancial Taxaton or other professional adviser innealately if you have recently sold all of your Zenyth Shares and are not a Zenyth Optionholder. oense discosti al sicies di dominist

Zenyti Tus apatites Limited ACN 006 614 375

Important Notices

General

You should read this Explanatory Booklet in its entirety before making a decision on how to vote on the resolutions to be considered at the Share Scheme Meeting, the General Meeting and the Option Scheme Meeting. The notices convening the Share Scheme Meeting. General Meeting and Option Scheme Meeting are contained in Section 10, Section 11 and Section 12 respectively of this Explanatory Booklet. Proxy forms for the Share Scheme Meeting and the General Meeting are enclosed with this Explanatory Booklet. (A proxy form for the Option Scheme Meeting is also enclosed if you are an Optionholder.)

Defined Terms

Capitalised terms in this Explanatory Booklet are defined either in the Glossary in Section 17 of this Explanatory Booklet or where the relevant term is first used.

Purposes of this Explanatory Booklet

The purposes of this Explanatory Bookiet are to:

(a) explain the terms and effect of the Share Scheme, the Special Distribution and the Option Scheme to Zenyth Security Holders:
explain the manner in which the Share Scheme, the Special ि। Distribution and the Option Scheme will be considered and, if approved, implemented;
(c) state any material interests of the Directors, whether as directors, members or creditors of Zenyth or otherwise, and the effect on those interests of the Share Scheme, the Special Distribution or the Option. Scheme as far as that effect is different from the effect on similar interests of other persons: and
$f$ cli provide such information as is prescribed by the Corporations Act and the regulations to that Act or as is otherwise material to:
the decision of the Zenyth Shareholders whether to approve the 単 Share Scheme and the Special Distribution; and
the decision of the Zenyth Optionholders whether to approve the (ii) Option Scheme.

ASIC, ASX and the Court

A copy of this Explanatory Booklet has been provided to AS/C for the purpose of section 411(2) of the Corporations Act and registered by ASIC for the purpose of section 412(6) of the Corporations Act. This Explanatory Booklet has also been provided to ASIC for the purpose of section 256C(5) of the Corporations Act.

ASIC has examined a copy of this Explanatory Bookfet. ASIC has been requested to provide a statement, in accordance with section 411(17)(b) of the Corporations Act, that ASIC has no objection to the Schemes. If ASIC provides that statement, it will be produced to the Court at the time of the Court hearing to approve the Schemes.

Neither ASIC nor any of its officers takes any responsibility for the contents of this Explanatory Booklet.

A copy of this Explanatory Booklet has been lodged with ASX. Neither ASX nor any of its officers takes any responsibility for the contents of this Explanatory Booklet.

The order of the Court convening the Share Scheme Meeting and the Option Scheme Meeting is not and should not be treated as an endorsement of, or any other expression of opinion by the Coart on, either Scheme.

Input From Other Parties

The CSL Information contained in this Explanatory Booklet has been prepared by and is the responsibility of CSL. Zenyth does not assume any responsibility for the accuracy or completeness of the CSL Information.

KPMG has prepared the general outline of taxation implications of the CSL Acquisition Proposal in Section 6 of this Explanatory Booklet and takes responsibility for that Section.

Deloitte has prepared the Independent Expert's Report in relation to the CSL Acquisition Proposal in Section 16 of this Explanatory Booklet and takes responsibility for that section.

Other than a respect of the information identified above, the information contained in the remainder of this Explanatory Booklet has been prepared by Zenyth and its advisers and is the responsibility of Zenyth. CS£ does not assume responsibility for the accuracy or completeness of any partof this Explanatory Booklet other than the CSL Information.

The information concerning Avexa contained in Section 4 of this Explanatory Booklet has been prepared by Zenyth based on public documents lodged by Avexa with ASX. Avexa has had no involvement in the CSL Acquisition Proposal or in the preparation of this Explanatory Booklet. Zenyth does not accept any responsibility for any errors, omissions or misstatements in Section 4 that are attributable to errors, ornissions or misstatements. in public documents lodged by Avexa with ASX.

Investment Decisions

This Explanatory Booklet does not take into account the investment. objectives, financial situation or particular needs of any Zenyth Security Holder or any other person. This Explanatory Booklet should not be relied on as the sole basis for any investment decision in relation to Zenyth. Shares or Avexa Shares. Independent financial and taxation advice should be sought before making any decision in relation to the CSL Acquisition Proposal.

Forward Looking Statements

Certain statements in this Explanatory Booklet relate to the future. Such statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of Zenyth or Avexa to be materially different from expected future results, performance or achievements expressed or implied by such statements. Such risks, uncertainties and other important factors include among other things, general economic conditions, specific market conditions, exchange rates, interest rates and regulatory changes. These statements reflect the expectations of relevant parties' views only as of the date of this Explanatory Booklet. Subject to any legal obligations (including under the Corporations Act, the Listing Rules or by an order of the Court), each of Zenyth and CSL has no obligation to disseminate after the date of this Explanatory Booklet any updates or revisions to any such statements to reflect any change in expectations in relation to those statements or any change in events, conditions or circumstances on which any of those statements is based.

Important Dates and Times	2
Letter From the Chairman of Zenyth Therapeutics Limited	3
Key Reasons to Vote in Favour of the CSL Acquisition Proposal	5
Section 1 - Summary of the CSL Acquisition Proposal	2
Section 2 - Expected Benefits and Other Considerations for Zenyth Security Holders	15
Section 3 - Profile of Zenyth	25
Section 4 - Profile of Avexa	35.
Section 5 - Information From CSL	47
Section 6 - Taxation Implications	53
Section 7 - Procedaral Aspects of the CSL Acquisition Proposal	-59
Section 8 - Implementation Procedures	65
Section 9 - Additional Information	71.
Section 10 - Notice of Share Scheme Meeting	77
Section 11 - Notice of General Meeting	83
Section 12 - Notice of Option Scheme Meeting	87
Section 13 - Scheme of Arrangement - Shares	93
Section 14 - Scheme of Arrangement - Options	103
Section 15 - Merger Implementation Deed and Deed Poll	109
Section 16 - Independent Expert's Report	135
Section 17 - Glossary	219
Corporate Directory	228

Important Dates and Times

Date of this Explanatory Booklet	21 September 2006
Last time and date by which the proxy form for the Share Scheme Meeting, the General Meeting and the Option Scheme Meeting can be lodged	5.00pm (AEST) on 21 October 2006
Time and date for determining eligibility to vote at the Share Scheme Meeting, the General Meeting and the Option Scheme Meeting	7.00pm (AEST) on 21 October 2006
Share Scherne Meeting" to vote on the Share Scherne	2.00pm (AEST) on 23 October 2006
General Meeting" to vote on the Special Distribution Resolution	2.30pm (AEST) on 23 October 2008 or as soon as reasonably practicable after the Share Scheme Meeting has concluded or been adjourned (whichever time is tater)
Option Scherne Meeting* to vote on the Option Scherne	3.00pm (AEST) on 23 October 2006 or as soon as reasonably practicable after the General Meeting has concluded or been adjourned (whichever time is later)
* The meetings will be held at the offices of Computershare, Yarra Falls, 452 Johnston Street, Abbotsford, Victoria
The timetable below is indicative only. Zenyth has the right to vary any or all of these dates and times and will provide reasonable notice of any such variation. Certain dates and times are conditional on the approval of the Share Scheme by Zenyth Shareholders and by the Court.
Court hearing to obtain orders approving the Schemes	31 October 2008
Effective Date of the Schemes	31 October 2006
Suspeasion of trading in Zenyth Shares on ASX	4.00pm (AEST) on 31 October 2006
Option Scheme Record Date: Time and date for determining entitlements to the Option Scheme Consideration by reference to the Zenyth Options Register	5.00pm (AEST) on 3 November 2006
Share Scheme Record Date: Time and date for determining entitlements to the Share Scheme Consideration and the Special Distribution by reference to the Zenyth Share Register	5.00pm (AEST) on 7 November 2006
implementation:	10 November 2006 to 17 November 2006
· Capital reduction (Special Distribution of Avexa Shares)
· Transfer of Zenyth Shares to CSL
· Payment of the Share Scherne Consideration by CSL to Scherne Shareholders
· Cancellation of Options and payment of Option Scheme Consideration. by Zenyth to Scheme Optionholders

Enquiries regarding the CSL Acquisition Proposal: If, after reading this Explanatory Booklet, you have any queries in relation to the CSL Acquisition Proposal, your Directors recommend that you consult your legal, financial, taxation or other professional adviser.

Letter From the Chairman of Zenyth Therapeutics Limited

21 September 2006

Zenyth Therapeutics Limited ACN 006 614 375

576 Swan Street, Richmond Victoria Australia 3121

Telephone (61-3) 9208-4000 Facsimile (61-3) 9208-4356

Dear Zenyth Security Holder,

On 17 July 2006, Zenyth Therapeutics Limited (Zenyth) and CSL Limited (CSL) jointly announced a proposal for CSL to acquire 100% ownership of Zenvth.

The proposed acquisition will be implemented by a scheme of arrangement between Zenyth and its Shareholders under which all Zenyth Shares will be transferred to CSL for a cash payment of \$0.82 per Share (Share Scheme). In addition to the Share Scheme, the following two ancillary transactions are proposed:

· a pro-rata in specie distribution by Zenyth to its Shareholders of all of the shares that Zenyth holds in Avexa Limited (Avexa), representing approximately 10.6% of the issued share capital of Avexa (Special Distribution). If approved, the Special Distribution will result in eligible Zenyth Shareholders receiving, in addition to the cash payment from CSL of \$0.82 per Zenyth Share, approximately one Avexa share for every six Zerivan Shares they hold; and
· a scheme of arrangement between Zenyth and its Optionholders under which all Zenyth Options will be cancelled and Optionholders will receive cash consideration of between \$0.0100 and \$0.5196 per Zenyth Option, depending on the terms of the relevant Zenyth Options (Option Scheme).

The Share Scherne, Special Distribution and Option Scheme are collectively referred to in this Explanatory Booklet as the CSL Acquisition Proposal. The Special Distribution and the Option Scherne will only proceed if the Share Scherne proceeds. If the conditions of the Share Scheme are satisfied or waived, the Share Scheme will proceed whether or not the Special Distribution or the Option Scheme is approved.

The terms of the CSL Acquisition Proposal (excluding the Option Scheme) imply a 78% premium to the volume weighted average price of \$0.48 at which Zenyth Shares traded on ASX in the one month period before 14 July 2006 (being the last trading day prior to the announcement of the CSL Acquisition Proposal to ASX and based on Avexa's closing share price of \$0.24 on 14 July 2006).

Your Directors unanimously endorse the CSL Acquisition Proposal and recommend that, in the absence of a more favourable proposal from another party:

· Zenyth Shareholders vote in favour of the Share Scheme and the Special Distribution; and
· Zenyth Optionholders vote in favour of the Option Scheme.

Each of your Directors intends to vote in favour of the Share Scheme and the Special Distribution with respect to all Zenyth Shares held by him or in which he otherwise has a relevant interest, in the absence of a more favourable proposal from another party. The Company's Chief Executive Officer, Dr Andrew Nash, is the only Director who holds Zenyth Options. Dr Nash intends to vote in favour of the Option Scheme in respect of all of his unexercised Options, in the absence of a more favourable proposal from another party.

Letter From the Chairman of Zenyth Therapeutics Limited continued

Your Directors' unanimous recommendation of the CSL Acquisition Proposal is supported by the conclusion of Deloitte, an independent expert engaged by Zenyth to assess the proposal. Deloitte has concluded that, in the absence of a more favourable proposal from another party, the Share Scheme and the Special Distribution are in the best interests of Zenyth Shareholders and the Option Scheme is on balance in the best interests of Zenyth Optionholders as a whole. Deloitte's report is reproduced in Section 16 of this Explanatory Booklet and you should read that report as part of your assessment of the CSL Acquisition Proposal.

As part of the approval process for the CSL Acquisition Proposal, two meetings of Zenyth Shareholders will be held on Monday, 23 October 2006 at the offices of Computershare, Yarra Falls, 452 Johnston Street, Abbotsford, Victoria. The first meeting is a meeting convened by order of the Supreme Court of Victoria to consider and vote on the Share Scheme. The second meeting is a General Meeting of Zenyth Shareholders to consider and vote on an ordinary resolution to approve the Special Distribution. Zenyth will also seek the approval of Zenyth Optionholders for the cancellation of their Options under the Option Scheme. This approval will be sought at a meeting of Zenyth Optionholders to be held immediately following the conclusion or adjournment of the General Meeting on 23 October 2006.

This Explanatory Booklet contains full details of the CSL Acquisition Proposal and will assist you in making an informed decision on how to vote at the Share Scheme Meeting, the General Meeting and the Option Scheme Meeting. I encourage you to read this Explanatory Booklet carefully.

On behalf of the Zenyth Board, I commend the CSL Acquisition Proposal to you and would like to take this opportunity to thank you once again for your support of Zenyth.

Yours sincerely

lan Davis Chairman

Key Reasons to Vote in Favour of the CSL Acquisition Proposal

Zenyth Shareholders

1. Substantial premium to trading prices of Zenyth Shares prior to announcement of the CSL Acquisition Proposal.
1. Certainty of cash and immediate fair value.
1. Opportunity to acquire direct investment in Avexa.
1. The independent Expert has concluded that, in the absence of a more favourable proposal from another party, the Share Scheme and Special Distribution are in the best interests of Zenyth Shareholders.
1. No more favourable proposal from another party has emerged.
1. No brokerage costs on the disposal of your Zenyth Shares or the receipt of Avexa Shares under the Special Distribution.

Zenyth Optionholders

1. Most Options are substantially 'out of the money' based on Zenyth's last traded price on ASX prior to announcement of the CSL Acquisition Proposal.
1. Immediate value.
1. The independent Expert has concluded that, in the absence of a more favourable proposal from another party, the Option Scheme is on balance in the best interests of Zenyth Optionholders as a whole.

Your Directors unanimously recommend that you vote in favour of all resolutions in relation to the CSL acquisition proposal, in the absence of a more favourable proposal from another party.

You should read this Explanatory Booklet in full before making any decision on the CSL Acquisition Proposal. In particular, you should refer to Section 2 for quidance on the expected advantages, possible disadvantages and other considerations in respect of the CSL Acquisition Proposal and Section 4.12 for guidance on the risk factors associated with holding Avexa Shares. This Explanatory Booklet does not take into account the financial situation, investment objectives and particular needs of any Zenyth Security Holder. You should consult your legal, financial, taxation or other professional adviser concerning the impact your decision may have on your own circumstances.

This page has been left blank intentionally.

Section 1 - Summary of the CSL Acquisition Proposal

1.1 Introduction

On 17 July 2006, Zenyth and CSL jointly announced that they had entered into an agreement ander which CSL proposes to acquire all of the Zenyth Shares on issue for \$0.82 cash per share through a scheme of arrangement between Zenyth and its Shareholders (Share Scheme and Share Scheme Consideration). If the Share Scheme is approved by Zenyth Shareholders and by the Court, and if all other necessary approvals and conditions are satisfied, Zenyth will become a wholly owned subsidiary of CSL. and will be delisted from ASX.

In addition to the Share Scherne Consideration, Zenyth Shareholders have an opportunity to realise additional value for their Zeavth Shares by approving a pro-rata in specie distribution. of all of the shares that Zenyth holds in Avexa Limited (Avexa), representing approximately 10.6% of the issued share capital. of Avexa (Special Distribution). The Special Distribution is to be achieved by an equal capital reduction that requires shareholder approval by an ordinary resolution. Avexa is a drag-discovery and development company based in Melbourne and listed on ASX. Avexa's business is the discovery, development and commercialisation of pharmaceutical medicines for the treatment of serious human infectious diseases. Further information on Avexa, including the rights attaching to Avexa Shares and the risks of holding Avexa Shares, is provided in Section 4 of this Explanatory Booklet.

To assist CSL in maintaining 100% ownership and control of Zenyth following implementation of the Share Scheme, Zenyth Optionholders are being asked to approve a scheme of arrangement. to cancel all snexercised Zenyth Options for cash consideration. ranging from \$0.0100 to \$0.5196 per Option, depending on the terms of the relevant Zeayth Options (Option Scheme).

This Explanatory Booklet contains information that the Zenyth Board coasiders is material to Zenyth Security Holders in making a decision whether or not to vote in favour of the resolutions required to approve the Share Scheme, the Special Distribution and the Option Scheme. You should carefully read this Explanatory Booklet as part of your consideration of the CSE Acquisition Proposal and each of the three transactions contemplated by it.

1.2 What You Will Receive

(a) Zenyth Shareholders

Subject to the Share Scheme becoming Effective and to the Special Distribution Resolution being duly passed, eligible Zenyth Shareholders will receive:

· \$0.82 cash from CSL for each Zenyth Share they hold as at the Share Scheme Record Date: and

· approximately one Avexa Share for every six Zenyth Shares they hold as at that date, with fractional entitiements of 0.5 and over rounded up to the nearest whole number of Avexa Shares and fractional entitlements of less than 0.5 disregarded.

You will be an eligible Zenyth Shareholder if you are registered as the holder of Zenyth Shares on the Share Scheme Record Date (expected to be 5:00pm AEST on 7 November 2006).

In relation to the Special Distribution of Avexa Shares, the Share Scheme contains provisions allowing Zenyth to disregard any share splitting that is deliberately undertaken to take advantage of the rounding up of fractional entitlements to Avexa Shares greater than 0.5 (see Section 8.4(f) of this Explanatory Booklet). Certain Zenyth Shareholders will not receive Avexa Shares under the Special Distribution and will instead receive the net sale proceeds of the Avexa Shares to which they would otherwise be entitled. Please refer to Section 8.4(c) of this Explanatory Booklet for ferther information.

Based on Zeayth's last traded price on ASX of \$0.54 on 14 July 2006 (being the last trading day prior to the announcement of the CSL Acquisition Proposal) and based on Avexa's closing price. on 4 September 2006 of \$0.21, the addredate value of the Share Scheme Consideration and the Special Distribution is \$0.855 per Zenyth Share (Total Consideration). The Total Consideration of \$0.855 per Zenyth Share as at 4 September 2006:

· values Zenyth at approximately \$107.0 million;
· represents a 58% premium to Zenyth's last traded price on ASX on 14 July 2006; and
· represents a 78% premium to the volume weighted average price of \$0.48 at which Zenyth Shares traded on ASX in the one month period before 14 July 2006.

The Share Scheme Consideration provides a fixed, certain value to eacible Zenyth Shareholders, However, the value of the consideration to be received ander the Special Distribution. depends on the market value of Avexa Shares. Therefore, the Implied Value of the Total Consideration will fluctuate depending on movements in the market price of Avexa Shares between the date of this Explanatory Booklet and the date that the Share Scheme and the Special Distribution are implemented.

(b) Zenyth Optionholders

Subject to the Share Scheme and the Option Scheme becoming Effective, eligible Zenyth Optionholders will receive cash consideration from Zenyth for each Zenyth Option they hold. You will be an eligible Zeayth Optionholder if you are registered as the holder of Zeayth Options on the Option Scheme Record Date

(expected to be 5:00pm AEST on 3 November 2006). The Option Scheme Consideration varies between \$0,0100 and \$0,5196. depending on the issue date, exercise price and expiry date of the various Options on issue and has been calculated based on the Black Scholes option valuation model. This valuation model is outlined in Section 2.4(b).

1.3 Directors' Recommendations and Intentions

Your Directors ananimously believe that the CSL Acquisition Proposal is in the best interests of Zenyth Security Holders and ananimously recommend that, in the absence of a more favourable proposal from another party:

· Zeavth Shareholders vote in favour of the Share Scheme Resolution and the Special Distribution Resolution; and
· Zenyth Optionholders vote in favour of the Option Scheme Resolution.

in the absence of a more favourable proposal from another party, each Director intends to vote in favour of the Share Scheme and the Special Distribution, in respect of all Zenyth Shares held by him or in which he otherwise has a relevant interest.

The Company's Chief Executive Officer, Dr Andrew Nash, is the only Director who holds Zenyth Options. Dr Nash intends to vote in favour of the Option Scheme in respect of all of his unexercised Options, in the absence of a more favourable proposal from another party.

No more favourable proposal from another party has been received as at the date of this Explanatory Booklet.

In forming their unanimous recommendations, your Directors have carefully considered the expected advantages, potential disadvantages and risks of the CSL Acquisition Proposal. These matters are described in detail in Section 2 and Section 4.12 of this Explanatory Booklet and in the Independent Expert's Report in Section 16. Your Directors believe that the expected advantages of the CSL Acquisition Proposal outweigh its potential disadvantages and risks.

1.4 Inter-relationship Between Share Scheme. Special Distribution and Option Scheme

The Share Scheme is not conditional on either the Special Distribution or the Option Scheme being approved and implemented. Therefore, if the Share Scheme becomes Effective, it will proceed even if the Special Distribution and the Option Scheme are not approved. However, neither the Special Distribution nor the Option Scheme will proceed unless the Share Scheme become legally effective

If Zenyth Shareholders intend to vote in favour of the Share Scheme, they should also vote in favour of the Special Distribution. If the Share Scherne becomes Effective but the Special Distribution. Resolution is not approved by the regaisite majority, Zenyth Shareholders will forego the opportunity to derive additional value for their Zenyth Shares. In these circumstances, this additional value (being the pro rata in specie distribution of all of the Avexa-Shares held by Zeayth) will pass to CSL.

1.5 Key Conditions

The key remaining conditions that must be satisfied in order for the Share Scheme to proceed are:

Zenyth Shareholders approving the Share Scheme at the Share Scheme Meeting. Votes in favour of the Share Scheme must be received from:
a majority in number (more than 50%) of Zenyth Shareholders voting at the Share Scheme Meeting (whether in person, by proxy, by attorney or, in the case of corporate Zenyth Shareholders or proxies, by corporate representative); and
Zenyth Shareholders who together hold at least 75% of the total number of Zenvth Shares voted at the Share Scherne Meeting:
- the Court approving the Share Scheme;
· no prohibitions, including restraining orders or injunctions, being issued by any court of competent jurisdiction or the Takeovers Panel:
· no Material Corporate Transaction, Material Adverse Change or Prescribed Occurrence (in each case as specifically defined in the Merger implementation Deed) arising in respect of Zenyth; and
· that the representations and warranties given by both parties. in the Merger Implementation Deed are (and remain) true and correct.

The key conditions that must be satisfied in order for the Special Distribution to proceed are:

· the Share Scherne becoming Effective; and
· Zenyth Shareholders approving the Special Distribution at the General Meeting. The Special Distribution Resolution is proposed as a general resolution requiring the approval of at least 50% of the votes cast by Zenyth Shareholders present and voting at the General Meeting, whether in person, by proxy or attorney or, in the case of a corporate Zenyth Shareholder. or proxy, by a representative.

Section 1 - Summary of the CSL Acquisition Proposal continued

The key conditions that must be satisfied in order for the Option Scheme to proceed are:

the Share Scheme becoming Effective:
· Zenyth Optionholders approving the Option Scheme at the Option Scheme Meeting. Votes in favour of the Option Scheme must be received from:
a majority in number (more than 50%) of Zenyth Optionholders voting at the Option Scheme Meeting (whether in person, by proxy or by attorney); and
Zenyth Optionholders whose Options represent at least 75% of the total amount of debts and claims of the Optionholders present and voting at the Option Scheme. Meeting (whether in person, by proxy or by attorney); and
the Court approving the Option Scheme.

These conditions are discussed more fully in Section 7 of this Explanatory Booklet and are set out in full in the Merger Implementation Deed which is reproduced in Section 15. With respect to Court approval of the Schemes, the Corporations Act and the Supreme Coart (Corporations) Rules 2003 provide a procedure for Zenyth Security Holders, if they wish to do so, to oppose the Court approving the Schemes. Please refer to Section 8.2 for further information.

1.6 Implementation and Timetable

If all necessary approvais and conditions for the Share Scheme are satisfied or waived (as applicable), it is expected that the Share Scheme will be fully implemented by 17 November 2006. If the Special Distribution and the Option Scheme are also approved, it is expected that those transactions will also be fally implemented by this time.

The key dates and times in relation to the CSL Acquisition Proposal are set out at the beginning of this Explanatory Booklet. Section 7 and Section 8 of this Explanatory Booklet describe in farther detail the procedural aspects of the CSL Acquisition Proposal and how it will be implemented.

1.7 The CSL Acquisition Proposal - Your Questions Answered

Set out below are sammary answers to some questions that Zenyth Security Holders may have in relation to the CSL Acquisition. Proposal. This information should be read in conjunction with the remainder of this Explanatory Booklet.

When will I be paid for my Zenyth Securities?

If the Schemes become Effective, the cash consideration payable. to Scherne Shareholders and Scherne Optionholders will be paid

within five Business Days after the Implementation Date. On the current indicative timetable, this means that you will be paid your Cash Consideration on or before 17 November 2006.

Will I be offered an opportunity to invest in CSL?

No. The CSL Acquisition Proposal is a cash only offer for all your Zenvth Securities.

When will I receive the Avexa Shares?

If the Share Scheme becomes Effective and the Special Distribution. Resolution is approved, Scheme Shareholders will receive their Avexa Shares within five Business Days after the Implementation Date. On the carrent indicative timetable, this means that Avexa Shares will be transferred to Scheme Shareholders on or before 17 November 2006. (Certain Scheme Shareholders will not be eligible to receive Avexa Shares and will instead receive the net. sale proceeds of the Avexa Shares to which they would otherwise have been entitled: for further information, please refer to Section 8.4(g) of this Explanatory Booklet.)

What happens if the market price of Avexa Shares increases or decreases between now and the date of implementation? The namber of Avexa Shares to which Scheme Shareholders will be entitled will not change as a result of any movement. in the market price of Avexa Shares.

When can I start trading my Avexa Shares on ASX?

The expected dispatch date of holding statements for Avexa Shares to be transferred to Scherne Shareholders is on or about 17 November 2006. You are responsible for confirming your allocation of Avexa Shares before trading in those shares. If you sell Avexa Shares before receiving confirmation of your allocation, you do so at your own risk.

Are there any risks for Shareholders if the CSL Acquisition Proposal proceeds?

If the Special Distribution Resolution is passed and the Share Scheme becomes Effective, Scheme Shareholders fother than Ineligible Scheme Shareholders) will receive Avexa Shares and they will be exposed to the risks associated with holding Ayexa Shares. These risks are outlined in Section 4.12 of this Explanatory Booklet.

If I wish to support the CSL Acquisition Proposal, what should Ldo?

If you are a Zenyth Shareholder, you should vote in favour of the Share Scheme at the Share Scheme Meeting and in favour of the Special Distribution Resolution at the General Meeting.

If you are a Zenyth Optionholder, you should vote in favour of the Option Scherne at the Option Scherne Meeting.

Zenyth Security Holders who are unable or unwilling to attend the meetings to be held on 23 October 2006 may vote at those meetings by proxy, attorney, or in the case of corporate shareholders or proxies, a natural person representative.

See Section 1.9 of this Explanatory Booklet for a summary on how to vote.

What happens if I vote against the Share Scheme? Can I be forced to sell my Zenyth Shares?

If the Share Scherne is approved by the requisite majorities at the Share Scherne Meeting and is approved by the Court, it will bind all Zenyth Shareholders, including those who vote against it (or those who do not vote at all). Therefore, in these circumstances, your Zenyth Shares will be transferred to CSL and you will receive the Share Scherne Consideration, even if you vote against the Share Scheme or you do not vote at all.

What happens if the Share Scheme is not approved?

If the Share Scherne is not approved:

· Zenyth Shareholders will retain their Zenyth Shares and continue to be exposed to the risks presently associated with this investment. These risks include general risks of holding shares and risks that are specific to Zenyth's business;
· Zebyth Shareholders will not receive the Share Scheme Consideration or the Special Distribution;
· Zeayth will continue to be owned by the current Zenyth Shareholders and governed by the current Board and management:
· the expected advantages of the CSL Acquisition Proposal, as outlised in Section 2 of this Explanatory Booklet, will not. be realised. However, some of the possible disadvantages and risks of the CSL Acquisition Proposal identified in Section 2 will not arise:
· Zenyth will have incurred substantial costs and expended management time and resources; and
· the Option Scheme will not take effect, with the result that Zenyth Options will not be cancelled.

What are the tax implications of the CSL Acquisition Proposal?

A gaide to the general taxation implications of the CSL Acquisition. Proposal is set out in Section 6 of this Explanatory Booklet. The description of tax matters in this Explanatory Bookiet is expressed in general terms and is not intended to provide taxation advice. in respect of the particular circumstances of any Zenyth Security Holder. You should seek your own specific taxation advice for your individual circumstances.

What are my alternatives?

lf you are a Zeayth Shareholder, your principal atternatives are to:

vote in favour of the Share Scherne and the Special Distribution at the Share Scheme Meeting and the General Meeting to be held on 23 October 2006 (this is the course of action unanimously recommended by your Directors);
· vote against the Share Scherne and the Special Distribution at those two meetings;
· sell your Zenyth Shares prior to the meetings to be held on 23 October 2006 or prior to the Share Scheme Record Date (scheduled to be 5.00pm (AEST) 7 November 2006); or
· do nothing; i.e. peither vote in favour of or against the Share Scheme, or the Special Distribution Resolution nor sell your Zenvth Shares.

li you are a Zeriyth Optionholder, you may:

· subject to the terms of your Options, exercise your Options prior to the Option Scheme Meeting or prior to the Option Scheme Record Date (scheduled to be 5,00pm (AEST). 3 November 2006) and receive Zenyth Shares that are eligible to participate in the Share Scheme and the Special Distribution:
· retain your Options and vote in favour of the Option Scheme at the meeting to be held on 23 October 2006 (this is the courseof action unanimously recommended by your Directors, if you do not previously exercise your Options);
· vote against the Option Scheme at the meeting to be held on 23 October 2006: or
· do nothing; i.e. neither vote in favour of or against the Option. Scheme nor exercise your Zenyth Options.

These atternatives and their implications are considered in more detail in Section 2.7 of this Explanatory Booklet.

1.8 What To Do Next

· Read the remainder of this Explanatory Booklet

You should read and consider the remainder of this Explanatory Booklet in full before making any decision on the CSL Acquisition Proposal.

· Consider your alternatives

Zenvth Security Holders shoald refer to Section 2 of this Explanatory Booklet for further quidance on the expected advantages and possible disadvantages of the CSL Acquisition. Proposal and Section 4.12 for quidance on the risk factors. associated with holding Avexa Shares. However, this Explanatory Booklet does not take into account the financial situation, investment objectives and particular needs of any Zenyth Security Holder.

Section 1 - Summary of the CSL Acquisition Proposal continued

• Vote at the Share Scheme Meeting, the General Meeting and the Option Scheme Meeting

Your Directors urge all Zenyth Shareholders to vote on the Share Scheme Resolution at the Share Scheme Meeting and on the Special Distribution Resolution at the General Meeting. Your Directors also urge all Zenyth Optionholders to vote on the Option Scheme Resolution at the Option Scheme Meeting.

The CSL Acquisition Proposal affects your investment in Zenyth and your vote at these meetings is important in determining whether the three transactions contemplated by the CSL Acquisition Proposal proceed (noting, however, that the Share-Scheme is not conditional on the Special Distribution or the Option Scheme proceeding).

See Section 1.9 of this Explanatory Booklet for a summary of voting procedares.

1.9 Summary of How to Vote

(a) Three Meetings

Three meetings are proposed: the Share Scheme Meeting, the General Meeting and the Option Scheme Meeting. Each meeting will be held at the offices of Computershare, Yarra Falls, 452 Johnston Street, Abbotsford, Victoria, Melbourne, on 23 October 2006, commencing with the Share Scheme Meeting at 2.00pm (AEST). The General Meeting will commence at 2.30pm (AEST). on 23 October 2006 or as soon as reasonably practicable after the Share Scheme Meeting concludes or is adjourned (whichever) time is later). The Option Scheme Meeting will commence at 3.00pm (AEST) on 23 October 2006 or as soon as reasonably practicable after the General Meeting concludes or is adjourned (whichever time is later).

The notices convening each meeting are contained in Section 10, Section 11 and Section 12 respectively of this Explanatory Booklet. Your vote at each meeting is important. If you are registered as a Zenyth Shareholder by the Zenyth Share Registry at the Voting Entitlement Time (7.00pm (AEST), 21 October 2006), you will be entitled to vote at the Share Scheme Meeting and the General Meeting, if you are registered as a Zenyth Optionholder by the Zenyth Share Registry at the Voting Entitlement Time (7.00pm (AEST), 21 October 2006), you will be entitled to vote at the Option Scherne Meeting

Voting at all three meetings will be conducted by poll.

(b) Voting in Person

Zenyth Security Holders wishing to vote in person should attend the meetings on 23 October 2006 and bring a form of personal identification (such as their driver's licence). Please arrive at the venue 30 migutes prior to the time designated for the commencement of the Share Scheme Meeting (2.00pm AEST). if possible, so that your security holding may be checked against. the Zenyth Share Register and/or Zenyth Options Register and attendances noted. Attorneys should bring with them the original or a certified copy of the power of attorney under which they have been authorised to attend and vote at the meetings.

(c) Voting by Proxy

Zenyth Security Holders wishing to vote by proxy at the meetings. must complete and sign or validly authenticate the appropriate personalised proxy form or forms which are enclosed with this Explanatory Booklet. A person appointed as a proxy may be an individual or a body corporate. Completed proxy forms must be delivered to Zenyth by 5.00pm (AEST) on 21 October 2006 in any of the following ways:

By post in the enclosed reply paid envelope provided to the Zenyth Share Registry:

Computershare Investor Services Pty Limited GPO 8ox 242 Melbourne Victoria Australia 3001

By hand delivery to the Zenyth Share Registry at:

Computershare Investor Services Ptv Limited Yarra Falls, 452 Johnston Street Abbotsford Victoria Australia 3067

By fax to the Zenyth Share Registry on +61 3 9473 2555.

Note: proxies may not be returned by email nor is internet. voting available.

(d) Voting by Attorney

If a Zenyth Security Holder executes or proposes to execute any docament, or do any act, by or through an attorney which is relevant to their security holding in Zenyth, that Zenyth Security Holder must deliver the instrument appointing the attorney to the Zenyth Share Registry for notation.

Zenyth Security Holders wishing to vote by attorney at the meetings must, if they have not already presented an appropriate. power of attorney to Zenyth for notation, deliver to the Zenyth-Share Registry (at the address or facsimile number specified in this Section 1.9) the original instrument appointing the attorney or a certified copy of it by 5.00pm (AEST) on 21 October 2006.

(e) Voting by Corporate Representative

To vote in person at the meetings to be held on 23 October 2006, a Zenyth Secarity Holder or proxy which is a body corporate may appoint an individual to act as its representative.

To vote by corporate representative at the meeting, a corporate Zenyth Security Holder or proxy should obtain an appointment of corporate representative form from the Zenyth Share Registry, complete and sign the form in accordance with the instructions on it. The appointment should be lodged at the registration desk on the day of the meetings.

(f) Further Information

Please refer to the notices of meeting in Section 10, Section 11. and Section 12 for further information on voting procedures and details of the resolutions to be voted on at the meetings.

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Section 2 That Section 2018

Section 2 - Expected Benefits and Other Considerations for Zenyth Security Holders

2.1 Introduction

The purpose of this Section 2 is to identify significant issues for Zenyth Security Holders to consider in relation to the CSL. Acquisition Proposal.

Before deciding how to vote at the Share Scheme Meeting, the General Meeting and the Option Scheme Meeting, Zenyth Secarity Holders should carefully consider the factors discussed below and the risk factors outlined in Section 4.12, as well as the other information contained in this Explanatory Booklet.

2.2 Directors' Recommendations and Intentions

Your Directors are Mr Ian Davis. Dr Andrew Nash, Professor Silvia. Itesculand Mr James MacKeazie. The interests of the Directors in the CSL Acquisition Proposal are disclosed in Section 9 of this Explanatory Booklet.

Having regard to all of the considerations discussed in this Section 2, your Directors unanimously consider that the expected advantages of the Share Scheme, Special Distribution and Option Scheme outweigh the potential disadvantages and risks. This conclusion is supported by the Independent Expert, Deloitte. The Independent Expert has concluded that, in the absence of a more favourable proposal from another party:

the Share Scheme and the Special Distribution are in the best interests of Zenyth Shareholders; and
the Option Scheme is on balance in the best interests of Zenyth Optionholders as a whole.

The Independent Expert's Report is set out in full in Section 16 of this Explanatory Booklet and you are strongly encouraged to read that report as part of your assessment of the Share Scheme, the Special Distribution and the Option Scheme. The independent Expert concluded that, in the labsence of a higher offer, the Option Scheme is reasonable although not fair. This is explained farther at Section 2.4(c) of this Explanatory Bookiet and in the full Independent Expert's Report in Section 16 of this Explanatory Booklet.

Your Directors unanimously recommend that, in the absence of a more favourable proposal from another party. Zenyth Shareholders vote in favour of the Share Scheme and the Special Distribution Resolution and that Zenyth Optionholders vote in favour of the Option Scheme.

In the absence of a more favourable proposal from another party, your Directors unanimously intend to vote all of the Zenyth Shares held by them or in which they otherwise have a relevant. interest in favour of the Share Scheme and the Special Distribution Resolution.

The Company's Chief Executive Officer, Dr Andrew Nash, is the only Director who holds Zenyth Options. Dr Nash intends to vote in favour of the Option Scherne in respect of all of his unexercised Options, in the absence of a more favourable proposal from another party.

No more favourable proposal from another party has been received as at the date of this Explanatory Booklet.

2.3 Zenyth Shareholders - Key Reasons for Your Directors' Unanimous Recommendation

(a) Substantial Premium to the Trading Prices of Zenyth Shares Prior to the Announcement of the CSL Acquisition Proposal

Subject to the Share Scheme becoming Effective and to the Special Distribution Resolution being duly passed, Scheme. Shareholders will receive:

· \$0.82 cash from CSL for each Zenyth Share they hold as at the Share Scheme Record Date; and
· approximately one Avexa Share for every six Zenyth Shares they hold as at that date, with fractional entitlements of 0.5 and over rounded up to the nearest whole number of Avexa Shares and fractional entitiements of less than 0.5 disregarded. (Ineligible Scheme Shareholders will receive the net sale proceeds of the Avexa Shares to which they would otherwise be entitled.)

The Implied Value of the Total Consideration is \$0.855 per Zenyth Share as at 4 September 2006. Please refer to the definition of Implied Value in the Glossary in Section 17 of this Explanatory Booklet for an explanation of how this value has been calculated.

The Implied Value of \$0.855 per Zenyth Share as at 4 September 2006:

· values Zenyth at approximately \$107 million;
· represents a 58% premium to the closing price of Zenyth Shares of \$0.54 on 14 July 2006, being the last traded price. of Zenyth Shares prior to the announcement of the CSE. Acquisition Proposal; and
· represents a 78% premium to the volume weighted average price of Zenyth Shares of \$0.48 in the one month period to 14 Buly 2006.

It is important to note that the implied Value of the Total Consideration of \$0.855 per Zenyth Share as at 4 September 2006 will vary according to movements in the market price of Avexa Shares after this date.

(b) Immediate and Certain Fair Value

The Share Scheme Consideration provides certainty of value and near certainty of timing. Specifically, if all of the conditions and approvals for the Share Scheme are satisfied or waived (see Section 7 of this Explanatory Booklet), the Share Scheme Consideration of \$0.82 per Share will be paid to Zenyth Shareholders approximately four weeks after the date of the Share Scheme Meeting.

Your Directors unanimously believe that the immediate and certain value of the Share Scheme Consideration represents fair value given the potential upside and risks associated with Zenyth's project portfolio. Although Zenyth's project portfolio offers considerable awestment upside if the projects are successful, there is also considerable timing and execution risk involved in achieving project success. Zenyth's most advanced projects are at, or about to enter, the formal preclinical phase. During this phase, studies in appropriate animal species will determine whether the Zenyth drugs have the required pharmacological characteristics and whether or not it is safe to progress testing into human subjects. Phase I clinical studies then confirm safety in human subjects before Phase II clinical studies are used to demonstrate efficacy in a relatively small number of patients. The process through to the conclusion of Phase II studies and the initial demonstration of efficacy is expected to take ap to three years. Phase III clinical studies, designed to confirm efficacy in a wider patient population,

must then be completed ahead of requiatory approval and marketing. Typically, a period of at least three to four years. would be required to progress from the end of Phase II through to marketing.

The Share Scheme Consideration offers Zenyth Shareholders an immediate and certain return, at an attractive premium, on projects that will take considerable time to develop. CSL will assume all of the benefits and risks of Zenyth's project portfolio going forward. As CSL is a considerably larger company than Zenyth with a much larger pool and scale of portfolio projects, CSL is better placed than Zenyth to absorb any failures in Zenyth's project portfolio.

(c) Zenyth Shareholders Receive Avexa Shares

If the Special Distribution Resolution is approved and if the Share-Scheme becomes Effective, Zenyth Shareholders (other than Ineligible Scheme Shareholders) will receive approximately one Avexa share for every six Zenyth Shares they hold (with fractional entitlements of 0.5 and over rounded up to the nearest whole number of Avexa Shares).

This will enable Zenyth Shareholders (other than Ineligible Scheme Shareholders) to have a direct investment exposure to Avexa, the anti-infectives biotechnology company that was demerged from Zenyth in September 2004. Farther details of Avexa are provided in Section 4 of this Explanatory Booklet.

(d) The Independent Expert has Concluded that the Share Scheme and the Special Distribution are in the best Interests of Zenyth Shareholders

The Independent Expert has concluded that, in the absence of a more favourable proposal from another party, the Share Scheme. and the Special Distribution are in the best interests of Zeavth Shareholders. The Independent Expert has assessed the fair value of Zenyth Shares to be in the range of \$0.77 to \$0.98 per Share.

The Implied Value of the Total Consideration per Zenyth Share as at 4 September 2006 is \$0.855. This is just below the mid point of the Independent Expert's valuation range of \$0.77 to \$0.98 per Zenyth Share.

The Independent Expert's Report is included in Section 16 of this Explanatory Bookiet. That report should be read in its entirety, including the assumptions on which the conclusions are based.

Section 2 - Expected Benefits and Other Considerations for Zenyth Security Holders continued

(e) No More Favourable Proposal Has Emerged

Since the announcement of the CSL Acquisition Proposal on 17 July 2006 and up to the date of this Explanatory Booklet, no alternative proposal from another party has emerged.

(f) No Brokerage Costs on the Disposal of Zenyth Shares or the Receipt of Avexa Shares

Zenyth Shareholders will not be required to pay any brokerage or other costs on the disposal of their Zenyth Shares under the Share Scheme or on the receipt of Avexa Shares ander the Special Distribution. (Certain Zenyth Shareholders will not be eligible to receive Avexa Shares under the Special Distribution. and they will instead receive the net sale proceeds of the Avexa Shares to which they would otherwise be entified. The net sale proceeds may include brokerage charges. Please refer to Section 8.4(g) of this Explanatory Booklet for further details.)

2.4 Zenyth Optionholders - Key Reasons for Your Directors' Unanimous Recommendation

(a) Most Options Substantially 'Out of the Money'

Most Zenyth Options have exercise prices of between \$0.62 and \$2.02 per Option. This is significantly above the prices at which

Zenyth Shares traded immediately prior to the announcement of the CSL Acquisition Proposal and for a number of months prior to that announcement. Based on the last traded price of Zenyth Shares prior to announcement of the CSE Acquisition Proposal on 3.7 July 2008 (\$0.54), most Zenyth Options were fout of the money' in that, in the absence of the Share Scheme and the Option Scheme and the associated re-rating of Zenyth Shares by the market, there would be no rational basis for paying the exercise price attached to those Options.

(b) Immediate Value

The Option Scheme enables Scheme Optionholders to receive immediate payment even though some Options may not become exercisable for some time or may not become exercisable at all given their exercise price relative to the price of Zenyth Shares. prior to the announcement of the CSE Acquisition Proposal and relative to the price of Zenyth Shares as at the date of this Explanatory Booklet.

Set out below is a table summarising the key particulars of Zenyth Options and their proposed treatment under the Option Scheme. This table excludes the July 2006 Management Options, as they will be dealt with as outlined in Section 7.4(!).

Number of Options	Issue Date	Expiry Date	Exercise Price	Option Scheme Consideration per Option	Total Option Scheme Consideration Payable
250,000	14-Nov-01	14-Nov-06	\$0.73	\$0.1063	\$26,565
500,000	30-Nov-01	30-Nov-06	\$1.28	\$0.0100	\$5,000
500,000	30-Nov-01	30-Nov-06	\$2.02	\$0.0100	\$5,000
650,000	$13 - 0ec - 01$	13-Dec-06	\$0.88	\$0.0100	\$6,500
50,000	23-Jan-03	23-Jan-08	\$0.34	\$0.5196	\$25,980
200,000	16-Oct-04	16-Oct-07	\$0.84	\$0.0592	\$11,839
349,650	31-Mar-04	31-Mar-09	\$0.84	\$0.1168	\$40,843
550,000	21-Feb-05	30-Jun-09	\$0.84	\$0.1297	\$71,338
400,000	19-Jan-05	19-Jan-10	\$0.84	\$0.1513	\$60,523
1,000,000	08-Aug-05	30-Jun-30	\$0.62	\$0.3363	\$336,274
200,000	07-Nov-05	30-Jun-31	\$0.62	\$0.3645	\$72,896
200,000	07-Nov-05	30-Jun-12	\$0.62	\$0.3911	\$78,228
200,000	07-Nov-05	$30 - J$ un $-13$	\$0.62	\$0.4162	\$83,240
200,000	24-Feb-06	30-Jun-10	\$0.62	\$0.3363	\$67,260
5,249,650					\$891,486

Your Directors believe that the Option Scheme Consideration provides fair and immediate compensation to Scheme. Optionholders for the cancellation of their Options. The Option Scheme Consideration set out in the above table has been calculated in accordance with the widely accepted Black Scholes valuation methodology. The amounts in the column entitled 'Option Scheme Consideration per Option' have been calculated as the greater of:

· \$0.01 per Zesyth Option; and
· the result derived by applying the Black Scholes valuation. methodology, asing a hypothetical Zenyth Share price of \$0.83. and assuming a hypothetical share price volatility of 9%.

A hypothetical share price of \$0.83 has been used as an input in the Black Scholes valuation methodology, as your Directors. believe that this fairly represents the prevailing market price of Zenyth Shares on ASX (reflecting the control premium inherent in the Share Scheme Consideration) between the date the CSL Acquisition Proposal was publicly announced and the date of this Explanatory Booklet. A hypothetical share price volatility of 9% has been ased as an input in the Black Scholes valuation. methodology, as your Directors consider that this is a reasonable. estimate of the volatility of the market price of Zenyth Shares (assuming a control premium) for the future, being the historical volatility of the Zenyth Share price since the date the CSL Acquisition Proposal was publicly announced.

(c) The Independent Expert has Concluded that the Option Scheme is on Balance in the Best Interests of Zenyth Optionholders as a Whole

The Independent Expert has concluded that, in the absence of a higher offer, the Option Scherne is reasonable and, on balance, is in the best interests of Zenyth Optionholders as a whole. The Independent Expert has also applied the Black Scholes valuation. methodology but has ased different inputs to those used by your Directors. This produced:

· a value bigher than the Option Scheme Consideration. in the case of six of the 14 series of Options;
· a value lower than the Option Scheme Consideration in the case of another six series; and
· the same value as the Option Scheme Consideration. in the case of the remaining two series.

The Independent Expert has concluded that the Option Scheme is not fair. However, since for all but one series of Options, the Option Scheme Consideration is higher than the intrinsic value of the Options (based on the excess of the Zenyth Share price ander the Share Scheme and the Special Distribution over the exercise price of the Option), and because the Option Scheme

provides Optionholders with an opportunity to realise a value for their Options, the majority of which were 'out of the money'. before the announcement of the CSL Acquisition Proposal, the Independent Expert has concluded that the Option Scheme is reasonable and on balance is in the best interests of Optionholders as a whole.

In the case of the remaining series of Options (those issued on 14 November 2003), the Independent Expert has stated that holders of those Options could achieve a better retarn by exercising their Options and participating in the Share Scheme and the Special Distribution. See Section 8.4 of the Independent Expert's Report in Section 16 of this Explanatory Booklet for further Information.

The Independent Expert's Report is set out in Section 16 of this Explanatory Bookiet. That report should be read in its entirety. including the assumptions on which the conclusions are based.

2.5 Possible Disadvantages

Your Directors have considered a number of possible disadvantages of the Share Scheme, Special Distribution and the Option Scheme, including the following.

(a) Loss of Direct Continuing Interest in Zenyth's Business

If the CSL Acquisition Proposal is approved and implemented, Zenyth Shareholders will cease to hold a direct interest in Zenyth and Zenyth Optionholders will no longer be able to acquire a direct shareholding in Zenyth.

(b) Volatility in Avexa Share Price

The value of Avexa Shares that will be received by Scheme Shareholders under the Special Distribution is dependent on the price at which those shares will trade on ASX. No assurances can be given as to this price. Historical market prices of Avexa-Shares should not be relied apon as indicative of the future. market price at which Avexa may trade. The risks associated with holding Avexa Shares are obtlined in Section 4.12 of this Explanatory Booklet.

(c) Taxation Consequences

If the Share Scherne and the Option Scherne are implemented, it will potentially result in taxation consequences for Zeriyth Security. Holders, which arise earlier than may otherwise have been the case. Section 6 of this Explanatory Booklet provides a general ostline of the likely taxation consequences of the Share Scheme. and the Special Distribution for Zenyth Shareholders.

Section 2 - Expected Benefits and Other Considerations for Zenyth Security Holders continued

2.6 Other Relevant Considerations

(a) The Share Scheme is Conditional

The Share Scheme is subject to various conditions. These conditions are summarised in Section 1.5 of this Explanatory Booklet, with fall details provided in Section 7. As at the date of this Explanatory Booklet, your Directors are not aware of any matter which would result in a breach, or lead to non-performance. of any of those conditions.

(b) Inter-relationship of the Share Scheme, Special Distribution and Option Scheme

The Share Scherne is not conditional on either the Special Distribution or the Option Scheme being approved and implemented. Accordingly, the Share Scheme will proceed even if Zenyth Shareholders do not approve the Special Distribution and even if Zenyth Optionholders do not approve the Option Scheme.

Therefore, all Zeaven Shareholders who intend to vote in favour of the Share Scheme should also vote in favour of the Special Distribution Resolation. Voting in favour of the Share Scheme. but not the Special Distribution Resolution will result in Zenyth Shareholders foregoise the opportunity to receive additional value by the transfer to them of Avexa Shares on a pro rata basis. In these circumstances, this additional value (being the pro rata in specie distribution of all of the Avexa Shares held by Zenyth) will pass to CSL.

Neither the Option Scheme nor the Special Distribution will proceed unless the Share Scheme is approved and implemented.

If the Share Scheme is implemented and the Option Scheme is not implemented then:

the Options will not be cancelled and will continue to be held. by Optionholders. However, Zenyth will shortly thereafter cease. to be listed on ASX. Therefore, on exercise of an Option, an Optionholder would receive a share in an unlisted company. This will result in value realisation being uncertain due to a potential lack of liquidity in unlisted Zenyth Shares. In addition, CSL would in these circamstances be entitled to compulsorily acquire those Zenyth Shares under Chapter 6A of the Corporations Act for a period of six months after the Implementation Date; and
the right of an Optionholder to continue to hold an Option (or any Share issued on the exercise of an Option) will be subject to CSL's power to compulsorily acquire (or cancel) all the Options or Shares issued on exercise in accordance with

the compulsory acquisition requirements of Chapter 6A of the Corporations Act (see Section 5.3 of this Explanatory Booklet) concerning CSL's intentions in these circumstances).

(c) Likelihood of a Competing Proposal

As at the date of this Explanatory Booklet, your Directors have not been potified by any third party of any intention on its part. to subrait a competiag proposal. Your Directors are not in any position to comment on whether a more favourable competing proposal from another party may eventuate. Your Directors will inform you of any material developments in relation to any legitimate. competisq proposal that may emerge from any third party. The Merger Implementation Deed entered into between Zenyth and CSL does not prohibit. Zeavth from soliciting or encouraging enquiries, discussions or proposals in relation to a competing transaction or continuing any discussions or negotiations inrelation to, or which may reasonably be expected to lead to. a competing transaction.

(d) All or Nothing Proposal - Zenyth Shareholders

if all of the conditions and approvals for the Share Scheme and Special Distribution are satisfied or waived (as applicable) (see Section 7 of this Explanatory Booklet):

. the Share Scheme and the Special Distribution will bind all persons registered as Zenyth Shareholders as at the Share Scheme Record Date, including those who do not vote on these two proposed transactions and those who vote against it: and
· Zenyth will become wholly-owned and controlled by CSL.

Conversely, if all of the conditions and approvals for the Share Scheme and Special Distribution are not satisfied or waived (as applicable), the states quo will continue.

(e) All or Nothing Proposal - Zenyth Optionholders

if all of the conditions and approvals for the Option Scheme are satisfied or waived (see Section 7 of this Explanatory Booklet), the Option Scheme will bind all persons who are registered as Zenyth Optionholders as at the Option Scheme Record date, including those who do not vote on the Option Scheme and those who vote against it.

Conversely, if all of the conditions and approvals for the Option. Scheme are not satisfied or waived (as applicable), Zenyth Optiochoiders will continue to hold their Options. However, if the Share Scheme becomes Effective, the right of an Optionholder

to continue to hold an Option (or any Share issued on exercise of an Option) will be subject to CSE's power to compulsorily. acquire (or cancel) all the Options or Shares issued on exercise in accordance with the compulsory acquisition requirements. of Chapter 6A of the Corporations Act (see Section 5.3 of this Explanatory Booklet concerning CSL's intentions in these circumstances).

(f) Risk of Zenyth Share Price Falling if the Share Scheme is Not Approved

In the one month period before 14 July 2006, being the last date that Zenyth Shares traded on ASX prior to the announcement of the CSL Acquisition Proposal, the volume weighted average price of Zeavth Shares was \$0.48. The 52 week trading range for Zenyth Shares up to 14 July 2006 was \$0.42 to \$0.60.

Your Directors expect that, if the Share Scheme is not approved. and if no alternative proposal emerges, it is likely that the price of Zenyth Shares on ASX will fail below the Share Scheme Consideration of \$0.82 offered under the CSL Acquisition Proposal.

(g) Costs

The costs incurred by Zenyth in developing the CSL Acquisition Proposal (including in negotiations with CSL, retention of advisers, engagement of the Independent Expert and preparation of this Explanatory Booklet) are likely to be approximately \$875,000. If the Share Scherne becomes Effective, these costs will effectively be met by CSL (as the sole shareholder of Zenyth following implementation of the Share Scheme). If the Share Scheme does not become Effective, these costs will be borne directly by Zenyth and will be paid in the 2007 financial year, reducing the net assets of the Company.

(h) Implications of Not Pursuing the CSL Acquisition Proposal

If all of the conditions and approvals for the Share Scheme, Special Distribution and the Option Scheme are not satisfied or waived (as applicable):

· Zenyth Shareholders will retain all of their Zenyth Shares and will continue to be exposed to the benefits and risks associated with that investment:
· Zeavás will retain its shareholding in Avexa and Zenvth Shareholders will not receive the Special Distribution;
· Zenyth Optionholders will retain all of their Zenyth Options:
· the existing Zenyth Board and management will continue to operate Zenyth's business; and

• the expected advantages of the CSL Acquisition Proposal, as outlined in Sections 2.3 and 2.4 of this Explanatory Booklet. will not be realised. However, some of the possible disadvantages of the CSL Acquisition Proposal identified in Section 2.5 will not arise.

If all of the conditions and approvals for the Share Scheme are satisfied or waived (as applicable), but the Special Distribution and/or the Option Scheme do not proceed:

· Zenyth Shareholders will receive the Share Scheme Consideration but not the Special Distribution; and
Zenvth Optionholders will retain all of their Zenvth Options. However, the right of an Optionholder to continue to hold an Option (or any Share issued on exercise of an Option) will be subject to CSE's power to compulsorily acquire (or cancel) all the Options or Shares issued on exercise in accordance with the compelsory acquisition requirements of Chapter 6A of the Corporations Act (see Section 5.3 of this Explanatory Booklet) concerning CSL's intentions in these circumstances).

2.7 What Are Your Alternatives and What Should You Do?

The following principal alternatives are available to Zenyth Security Holders in relation to their Zenyth Securities. Zenyth encourages you to consider your personal risk profile, portfolio strategy, tax position, financial circumstances and seek professional advice before making any decision in relation to your Zenyth Sperimidae

Section 2 - Expected Benefits and Other Considerations for Zenyth Security Holders continued

Zenyth Shareholders
Vote in favour of the Share Scheme and Special Distribution Resolution	This is the course of action unanimously recommended by your Directors, in the absence of a more favourable proposal from another party. The reasons for your Directors' unanimous recommendation are set out earlier in this Section 2.
	To follow your Directors' unanimous recommendation, you should vote in favour of the Share Scheme at the Share Scheme Meeting and in favour of the Special Distribution Resolution at the General Meeting. For a summary of how to vote at these two meetings, please refer to Section 1.9 of this Explanatory Booklet.
Vote against the Share Scheme and Special Distribution Resolution	If, despite your Directors' unanimous recommendations and the conclusion of the Independent Expert, you do not support these proposals, you may vote against them at the Share Scheme Meeting or the General Meeting or both.
	However, if all of the conditions and approvals for the Share Scheme and the Special Distribution are satisfied or waived (as applicable), these proposals will bind all Zenyth Shareholders, including those who vote against the resolutions at these two meetings or those who do not vote at all.
	You should also note that if the Share Scheme becomes Effective, it will proceed even if the Special Distribution Resolution is not approved.
Sell your Zenyth Shares on ASX	The existence of the CSL Acquisition Proposal does not preclude you from selling your Zerryth Shares on market for cash, if you wish, provided you do so before close of trading in Zenyth Shares on ASX on the Effective Date (currently expected to be 31 October 2006), when trading in Zenyth Shares will end.
	If you are considering selling your Zenyth Shares on ASX, you should have regard to the prevailing trading prices of Zenyth Shares and compare that to the Total Consideration being offered under the CSL Acquisition Proposal. You may ascertain current trading prices of Zenyth Shares through the ASX website (www.asx.com.au), by contacting your stockbroker or by reading the business pages of any major metropolitan newspaper.
	Zenyth Shareholders who sell their Zenyth Shares on market for cash: · will receive the consideration for sale of their shares sooner than they would receive under the Share Scheme; · will not be entitled to receive the Special Distribution; · may incur a brokerage charge; and · will not be able to participate in a more favourable proposal from another party, if one emerges,
	noting that, as at the date of this Explanatory Booklet, your Directors have not received notice from any third party of an intention to make any competing proposal.
Do nothing; i.e. neither vote in favour of nor against the Share Scheme or the Special Distribution nor sell your Zenyth Shares	Zenyth Shareholders who elect neither to vote at the Share Scheme Meeting or General Meeting nor self their Zenyth Shares will: • If the Share Scheme becomes Effective - have their Zenyth Shares compulsorily transferred to CSL by operation of the Share Scheme and receive payment of \$0.82 cash per Zenyth Share; · if the Special Distribution is approved and implemented - receive approximately one Avexa Share for every six Zenyth Shares held (unless they are an Ineligible Scheme Shareholder, in which case they will receive the net sale proceeds of the Avexa Shares to which they would otherwise have been entitled); and · If the Share Scheme is not approved and implemented - retain their Zenyth Shares.

Zenyth Optionholders
Exercise your Options	Optionholders may, subject to the terms of their Options, exercise their Options. If they do so at any time prior to Option Scheme Record Date (5.00pm AEST on 3 November 2006), they will be issued with Shares that will be eligible to participate in the Share Scheme and the Special Distribution. This participation will include eligibility to vote at the Share Scheme Meeting and the General Meeting if the Shares that are issued on exercise of the Options are recorded in the Zenyth Share Register prior to the Voting Entitlement Time (7.00pm AEST on 21 October 2006). Optionholders should note that these dates are indicative only. Zenyth has the right to vary any or all of these dates and times and will provide reasonable notice of any such variation.
	In respect of the Options issued on 14 November 2001, the Independent Expert has stated that holders of those Options could achieve a better return by exercising their Options and participating in the Share Scheme and Special Distribution. See Section 8.4 of the Independent Expert's Report in Section 16 of this Explantory Booklet for further information.
Vote in favour of the Option Scheme	This is the course of action unanimously recommended by your Directors for Optionholders who do not exercise their Options prior to the Voting Entitlement Time.
	To follow your Directors' unanimous recommendation, you should vote in favour of the Option Scheme at the Option Scheme Meeting. For directions on how to vote at this meeting and important voting information generally, please refer to the summary in Section 1.9 of this Explanatory Booklet.
Vote against the Option Scheme	If you do not support the Option Scheme, you may vote against it at the Option Scheme Meeting.
	However, you should note that if all the conditions and approvals for the Option Scheme are satisfied or waived (as applicable), this scheme will bind all Zenyth Optionholders, including those who vote against the proposal at the Option Scheme Meeting or those who do not vote at all.
Do nothing; i.e. neither exercise your Options nor vote in favour of or against the Option Scheme	Zenyth Optionholders who elect neither to exercise their Zenyth Options nor vote at the Option Scheme Meeting will: · if the Option Scheme becomes Effective - have their Options cancelled and receive a cash sum as set out in the table in Section 2.4(b); or • if the Option Scheme is not approved and implemented - retain their Zenyth Options. However, if the Share Scheme becomes Effective, the right of an Optionholder to continue to hold an Option (or any Share issued on the exercise of an Option) will be subject to CSL's power to compulsorily acquire (or cancel) all the Options or Shares issued on exercise in accordance with the compulsory acquisition requirements of Chapter 6A of the Corporations Act (see Section 5.3 of this Explanatory Booklet concerning CSL's intentions in these circumstances).

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Section 3 - Profile of Zenyth

3.1 Overview of Zenyth Today

Zenyth (previously Amrad Corporation Limited) is an Australian based, pablicly listed (ASX: ZTL) biotechnology company focased on the development and commercialisation of antibody-based therapies in the areas of inflammation and cancer. Zenyth employs 37 technical and support staff and operates from offices and laboratories located in Melbourse. Victoria.

Zenyth has intellectual property rights to a namber of cytokines and cytokine receptors which have been shown to be key mediators in cancer and inflammatory diseases such as rheumatoid arthritis and asthma. Many of Zenyth's proprietary targets have been licensed from prominent Australian medical research institutes and Zenyth has a long history of strong relationships with these and other research institutes within the region.

Zenyth's scientific team has expertise in antibody generation and engineering and works closely with academic medical research institutes as well as local and international pharmaceutical and biotechsology compasses to advance therapies from the discovery phase through development to commercialisation. The experienced team of around 20 scientists works in state-of-the-art laboratories with access to multiple human antibody platforms including Medarex's UltiMAb and Dyax's phage display technologies.

Zenyth has a strong history of commercial arrangements with large pharmaceutical and biotechnology companies to progress its projects and/or drug candidates through development. These commercial arrangements entitle Zenyth to receive licence fees, milestone payments and royalties on product sales. Income from such arrangements has been reinvested by Zenyth in drag discovery and development activities.

Zenyth's current major research and development projects. include the following:

· discovery and development of a monoclonal antibody against the IL-13 receptor alpha-1 subanit for the treatment of asthma and other respiratory diseases. This project is partnered with Merck & Co., Inc. (Merck).
· discovery and development of a monoclonal antibody against the GM-CSF receptor alpha subunit for the treatment. of inflammatory diseases such as rheumatoid arthritis. This project is a 50/50 collaboration between Zenyth and Cambridge Antibody Technology Limited (CAT), a wholly owned subsidiary of AstraZeneca UK Limited (AstraZeneca).
· discovery and development of antagonists of G-CSF, such as monoclonal antibodies or soluble receptors, for the treatment of inflammatory diseases including chronic obstructive pulmonary disease and rheumatoid arthritis. This project is a partnership between Zenyth and MuriGen Pty Ltd (MuriGen).

· discovery and development of antibody inhibitors of Vascular Endothelial Growth Factor B (VEGF-B) for potential use in the treatment of cancer and rheamatoid arthritis. This project is a collaboration between Zeayth and the Ladwig Institute for Cancer Research (LICR).

in addition to the above projects, Zenyth has a number of earlier stage discovery projects to provide a pipeline of fature therapeutic development opportunities.

3.2 Further Details of Zenyth's Key Projects

(a) IL-13 Receptor Antibody (MK-6105)

Zenyth and its partner Merck are developing a monoclonal antibody that targets the interleukin-13 receptor alpha-1 subanit. (IL-13Ra1) to inhibit IL-13 activity as a novel approach to the treatment of asthma and other respiratory diseases

Asthma is one of the most common diseases in the world, affecting all ages and socio-economic groups. Asthma is characterised by reversible increases in airflow resistance and excessive responsiveness of the lang to initants and stimulants. The exact cause of asthma is poorly understood however it is regarded as a chronic inflammatory disease. Despite the use of current asthma treatments, up to 10% of asthma patients continue to selfer severe disease which impacts significantly on their quality of life. Treatment options are limited for these patients and there is a substantial need for improved therapeutic agents.

An extensive collaborative effort involving scientists from both Zenyth and Merck has resulted in an optimised fully human. monoclonal antibody designated MK-6105 being selected by Merck for farther development. Preliminary manufacturing activities are underway with formal preclinical development expected to commence shortly. Under the terms of the licensing agreement, Merck is responsible for the formal preclinical activities as well as the subsequent clinical development and marketing. Initial clinical development will be focused on asthma, however additional respiratory and other indications will also be considered.

Zenyth has received from Merck US\$16.5 million in licence fees and milestone payments. Zenyth is entitied to receive additional milestone payments daring product development as well as rovaties on product sales.

Scientific Rationale

This project targets the alpha-1 subunit of the R-13R, a shared receptor component that, in addition to IL-13, is also used by IL-4. Studies in animal models of asthma have identified a crucial role for both 8.-13 and IL-4 as mediators of the underlying asthmadisease process. In these animal models inhibitors of IL-13 were

demonstrated to: 1) prevent the accumulation of inflammatory. cells within the lang; 2) prevent increased sensitivity to irritants that cause airways to coastrict; and 3) prevent the increased mucus production that further contributes to airway blockage. In addition, these models also implicate IL-33 as a cause of long term. remodelling of airways, characterised by thickening of the airway. muscle layer, which further increases the ability of irritants to constrict airways.

Analysis of it -13Ra1 expression in human lungs supports the conclusion that IL-13 may similarly play a key role in the development of asthma in humans and it thus represents a potentially important new therapeutic target.

(b) GM-CSF Receptor Antibody (CAM-3001)

Zenyth and CAT partnered in 2001 to discover and develop therapeutic antibodies against the GM-CSF receptor alpha subunit (GM-CSFRα) for the treatment of inflammatory diseases such as rheumatoid arthritis (RA). Under the terms of the collaboration Zenyth and CAT plan to co-develop a GM-CSFR& antibody until the end of Phase II clinical trials and will share costs and profit on a 50/50 basis. AstraZeneca recently (June 2006) acquired CAT and became Zenyth's new partner on the project.

Rheumatoid arthetis is a chronic is ammatory and destructive joint disease affecting approximately 1% of the population in the industrialised world. The specific underlying cause of RA remains anknown however an ongoing chronic immune response triggers. a cascade of inflammatory changes within the joint. The last couple of years have seen the commencement of a revolution in the management of RA with the approval of biological drugs Enbrel®. Humira* and Remicade* which target the cytokine TNEa to infilial the infammatory pathways underlying the disease. Although a ground-breaking treatment for some, approximately 30-50% of patients treated with these drags fail to achieve a satisfactory. reduction in symptoms. Patients with inadequate responses to these anti-TNF therapies are an obvious target market for new drugs directed at alternative inflammatory mediators such as GM-CSF.

The collaboration between scientists at Zenyth and CAT over a number of years has resulted in the development of an optimised fully human monoclonal antibody that binds to the GM-CSFRa and inhibits the activity of GM-CSF. The antibody, designated CAM-3001, is carrently in formal preclinical development for rheumatoid arthritis. A clinical trial application for the first Phase I clinical trial is planned for submission in the first half of 2007.

Scientific Rationale

GM-CSF requiates the survival and activity of inflammatory cell populations and is known to play a key role in the development. and progression of autoimmune and other inflammatory diseases in relevant animal models, in animal models of rheumatoid arthritis. antibodies directed against GM-CSF dramatically reduce disease severity. There is also evidence suggesting GM-CSF and its receptor play an important role in the human form of rheumatoid arthritis. An antibody which blocks the GM-CSF receptor alpha and inhibits the actions of GM-CSF may therefore provide a novel approach to the treatment of RA.

GM-CSF is also a major requiator of the activation and servival of inflammatory cells in the fung and these cells are known to be intimately involved in the development of chronic obstructive pulmonary disease (COPD). Recent animal data indicates that inibiting the actions of GM-CSF reduces the severity of experimental COPD. Zenyth's GM-CSF receptor alpha antibody may therefore. also be aseful in the treatment of COPD.

(c) G-CSF Antagonists

In February 2006, Zenyth and MuriGen announced an agreement. to co-develop antagonists of granulocyte colony stimulating factor (G-CSF), such as moaoclonal antibodies or soluble receptors. for the treatment of inflammatory diseases including rheumatoid arthritis and chronic obstructive pulmonary disease. Zenyth and MusGen are jointly fanding research and development of the potential drug on a cost sharing basis through to completion of proof-of-concept is human clinical trials.

COPD is a chronic inflammatory fung disease which in the majority of cases is related to cigarette smoking. Repeated exposure to tobacco smoke is believed to trigger a chronic inflammatory. response with changes (remodelling) throughout the conducting airways resulting in airflow limitation that is not fully reversible. COPD is currently treated with drags originally developed for asthma, however none of these drugs have been shown to slow. the progression of the disease and in many patients offer limited. benefit at best. Therefore, there is an urgent need to develop new treatments for COPD which target the inflammatory processes underlying the disease.

Amonast a number of strategies. Zenyth scientists are asing the Dyax phage display library in an effort to identify fully-human antibodies that inhibit G-CSF action. Zenyth and MariGen expect to select a lead G-CSF antagonist for further development by mid-2007.

Section 3 - Profile of Zenyth continued

Scientific Rationale

G-CSF is a cytokine which acts through a specific cell surface receptor to stimulate the differentiation and activation of inflammatory cells from their precursors within the bone marrow. These inflammatory cells, which consist primarily of neutrophils. infiltrate into sites such as aliways in COPD and arthritic joints in RA, and produce a large number of mediators that contribute to disease progression, Inhibiting the actions of G-CSF or its receptor may therefore provide a novel approach to the treatment of these diseases. In recent studies in mouse models of RA the administration of an anti-G-CSF antibody was shown to reduce the severity of established arthritic disease with the level of response similar to that observed with an antibody directed against TNF.

(d) VEGF-B Antibody

Zenyth and LICR have a collaboration to develop antibody. inhibitors of Vascular Endothelial Growth Factor B (VEGF-B) for potential use in the treatment of cancer and rheumatoid arthritis.

Genentech's Avastin®, a monoclonal antibody inhibitor of VEGF-A activity, became the first angiogenesis inhibitor to reach the market when it was approved by the FDA in February 2004. as a first-line therapy for metastatic colorectal cancer. VEGF-B. has also been demonstrated to play a role in the regulation of anglogenesis, and a VEGF-B antagonist has the potential to similarly become a valuable agent in the inhibition of turnour growth and metastasis.

Antibodies against VEGF-B are currently being assessed in animal models of cancer and RA. Once the results from those studies ere available, a decision on moving a VEGF-B astibody isto formal development will be possible. A moase monoclorial antibody which is a potent antagonist of VEGF-B has been humanised by Zenyth and is suitable for development.

Scientific Rationale

VEGF-B is a member of the VEGF cytokine family. All five members of the VEGF family play some role in the differentiation, recreitment, proliferation and survival of endothelial cells. These activities represent key events in blood vessel formation - a process known as angiogenesis. Angiogenesis is a pivotal process in the generation of new tissues, providing the necessary oxygen and nutrients to easibe the tissues to grow. A variety of diseases, including RA and cancer, depend on new blood vessel formation, hence inhibiting new blood vessel development is an exciting new therapeutic approach.

Evidence for the therapeutic potential of inhibiting VEGF-8 in RA comes from mice which do not express the VEGF-B gene. These mice display reduced symptoms in models of arthritis, suggesting that the inhibition of VEGF-B may represent a novel new treatment strategy for the management of RA.

(e) Pipeline Projects

In addition to Zenyth's lead antibody projects, the Company is involved in a small number of carefully selected earlier stage. projects. The purpose of these projects is to develop valuable. new intellectual property and to provide Zenyth with a pipeline of candidate targets and molecules suitable for future preclinical and clinical development. These projects are derived from collaborations with leading local and international scientists and research institutions and, where possible, costs are leveraged through various research funding agencies.

VEGF-B Gene and Protein

Zenyth has previously generated substantial evidence supporting the potential application of the VEGF-8 gene and protein incardiovascular disease and is presently undertaking additional studies aimed at strengthening the data package with a view to seeking a partner with specific expertise in the development of novel therapies for cardiovascular disease.

EGF Inhibitor

The epidermal growth factor (EGF) pathway is a validated therapeutic target for cancer, with several drugs that biad to and inhibit receptor activity either on the market or in late stage. clinical trials.

Stadies by Zeayth collaborators at the Commonwealth Scientific and Industrial Research Organisation (CSIRO) and LICR have identified a truncated form of the EGF receptor (EGFR) that binds to EGF and other EGFR figands with high affinity. In cell-based assays the truncated receptor has been shown to be a potent inhibitor of EGF activity.

Zenyth is collaborating with CSIRO and the LICR to evaluate the potential of the truncated EGFR (known as EGFR501) as a treatment. for cancer. Recombinant EGFR503 is undergoing rigorous testing. in a number of animal models of human tumour growth.

Suppressors of Cytokine Signalling (SOCS)

SOCS are a family of naturally occurring proteins which modulate cytokine activity. Zenyth holds key intellectual property over these SOCS proteins and is employing various strategies to both inhibit and enhance SOCS activity and identify potential therapeutic candidates and relevant target diseases. In order to fully capitalise on the accrued scientific expertise and validation of key SOCS targets, Zenyth is exploring potential relationships with companies that possess complimentary skills to collaboratively develop new drugs for indications in which SOCS function plays a major role.

3.3 Recent Initiatives

Since January 2006, Zenyth has announced to the market the following initiatives and events potentially of interest to Shareholders:

· January 2006: An antibody library license agreement with Dyax Corp., (Dyax). Under the agreement Zenyth is licensed to use the Dyax phage display libraries of human antibodies for the discovery and development of new human antibody-based. therapies for inflammation and cancer.
· February 2006: A collaborative agreement with MuriGen to co-develop a new class of drugs that target arthritis and other inflammatory diseases. The collaboration aims to develop therapeutic proteins that inhibit the activity of the cytokine granulocyte colony stimulating factor (G-CSF), or its receptor.
· February 2006: An exclosive in-license from LICR patents to antibodies that target the receptor for the cytokine G-CSF. The agreement provides Zenyth with access to antibodies and reagents developed by a team of researchers at the Melbourne Branch of LICR, and forms part of the collaborative project with MuriGen on G-CSF antagonists.
May 2006: Receipt of the fourth milestone payment from Merck under the agreement to collaborate with Merck on the development of an it.-13 receptor astibody for the treatment of asthma. The payment of US\$2.5 million brought Merck's total payments to Zenyth since the collaboration began in June 2003 to US\$16.5 million.

Section 3 - Profile of Zenyth continued

3.4 Zenyth Historical Financial Information

(a) Income Statements

The following selected consolidated income statement information has been extracted from Zenyth's condensed consolidated income statements for the year ended 30 June 2006 (audited and as lodged with ASX on 23 August 2006), the six month reporting period ended 31 December 2005 and the year ended 30 June 2005 (audited).

Condensed Consolidated Income Statement

	Year Ended 30 June 2006 (audited) \$'000	Six Months Ended 31 Dec 2005 \$'000	Year Ended 30 June 2005 (audited) \$'000
Licence fee and royatty revertue	4,153	983	8,300
Revenue	4,153	983	8,300
Other income	1,123	673	2,304
Changes in the fair value of investment in listed entity	1,790	2,949	(2,023)
Changes in the fair value of funds under management	4,225	2.234	5,317
Changes in fair value of investments	6,015	5,183	3.294
Licence fee and royalty payments	(1, 207)	(82)	(1, 149)
Contract research and development costs	(4, 913)	(2,265)	(4, 157)
Personnel expenses excluding share-based payment expense.	(4, 493)	(2,310)	(4.494)
Share-based payment expense	(145)	(59)	(154)
Depreciation and amortisation expenses.	(663)	(278)	(540)
Einance costs	(22)	${3}$	(175)
Other expenses from ordinary activities	(4, 279)	(2,186)	(4,282)
Loss before tax	(4, 429)	(344)	(1,053)
Income tax expense
Loss for the period after tax	(4, 429)	(344)	(1,053)
Loss of discontinued operation, net of tax			(723)
Net income recognised directly in equity		$\ddot{\phantom{a}}$	2,400
Total recognised income and expense for the period	(4, 429)	${344}$	624

(b) Balance Sheets

The following selected balance sheet information has been extracted from the Zenyth condensed consolidated balance sheets as at 30 June 2006 (audited and as lodged with ASX on 23 August 2006), 31 December 2005 and 30 June 2005 (audited).

Condensed Consolidated Balance Sheet

	As at
	30 June 2006	As at	30 June 2005
	(audited)	31 Dec 2005	(audited)
	\$'000	\$'000	\$'000
Current assets
Cash and cash equivalents	204	662	2,152
Trade and other receivables.	107	374	335
lavestments in fands ander management.	45,549	46,959	49,575
lavestment in listed entity	4,844	6,003
Other	344	785	150
Total corrent assets	51,048	54,583	52,212
Non-current assets
Trade and other receivables.	105	341	197
lavestment in listed entity			3.054
Property, plant and equipment	1,495	1,273	1,173
Total non-current assets	1,600	7,417	4,424
Total assets	52,648	55,997	56,636
Current liabilities
Trade and other payables	2,359	1,758	1,567
Employee benefits	880	824	816
Other			500
Total corrent liabilities	3,239	2,582	2,883
Non-current liabilities
Employee benefits	40	47	100
Total non-current liabilities	40	47	100
Total liabilities	3,279	2,629	2,983
Net assets	49,369	53,368	53,653
Equity
Issued capital	136,451	136,461	136,451
Accumulated losses	(87,082)	(83, 083)	(82,798)
Total equity	49,369	53,368	53,653

Section 3 - Profile of Zenyth continued

(c) Statements of Cash Flows

The following selected cash flow information has been extracted from the condensed consolidated statements of cash flows for the year ended 30 June 2006 (audited and as lodged with ASX on 23 August 2006), the six months ended 31 December 2005 and the year ended 30 June 2005 (audited).

Condensed Consolidated Statement of Cash Flows

	Year Ended 30 June 2006 (audited) \$'000	Six Months Ended 31 Dec 2005 \$'000	Year Ended 30 June 2005 (audited) \$'000
Cash flows from operating activities
Cash receipts in the course of operations	4,349	1,674	10.206
Cash payments in the course of operations	(13,634)	(7,665)	(14.342)
Interest received	42	18	258
Net cash used in operating activities	(9, 243)	(5, 973)	(3,878)
Cash flows from investing activities
Payments for property, plant and equipment	(1,003)	(378)	(358)
Payment for investment in Avexa Limited			(5,800)
Funds divested under demerger of Avexa Limited			(7,200)
Payment for transfer of employee entitlements at book value to Avexa Limited			(86)
Proceeds from sales of plant and equipment	46	11	10
Proceeds from sale of investments in land and buildings in a prior year			3.000
Net proceeds from disposal of controlled entities and businesses in a prior year			2,454
Net cash used in investing activities	(955)	(367)	(7,980)
Cash flows from financing activities
Net cash transferred to fands ander management	8,250	4,850	13,400
Net cash outlay on share buy back			(1.693)
Net cash from financing activities	8,250	4,850	11,707
Net decrease in cash and cash equivalents held	(1,948)	(1,490)	(151)
Cash and cash equivalents at the beginning of the period	2.152	2,152	2.303
Cash and cash equivalents at the end of the period	204	662	2.152

3.5 Management Discussion and Analysis of Financial Information

(a) Full Year Analysis

For the year ended 30 June 2006, Zenyth reported an operating loss of \$4.4 million.

Licence fee and royatty reveaue for the year of \$4.3 million was supplemented by other income of \$1.1 million and full year positive. movements in the value of Zenyth's investments in Avexa and funds usder management of \$1.8 million and \$4.2 million respectively.

Eicence fee payments of \$1.2 million, direct external project commitments of \$4.9 million and employee costs of \$4.5 million. collectively comprised 67% of total expenditure for the year of \$15.7 million. Although direct external R&D costs have risen by approximately \$0.7 million compared to last year, other costs. have been contained such that the balance of 2006 overall expenditure has remained at the 2005 level.

Cash and funds under management as at 30 June 2006 were \$45.8 million representing a net consumption for the year of \$6.0 million consistent with the operating result after allowing for the

non-cash movement of \$1.8 million in the carrying value of the investment in Avexa, a capital expenditure outlay of \$1.0 million. versus a depreciation charge of \$0.7 million, and a non-cash. royalty revenue of \$0.5 million.

(b) Half Year Analysis

For the half-year ended 31 December 2005, Zenyth had reported a consolidated loss after taxation of \$0.3 million. The key determinants within this result were a \$2.9 million fair value. increment to the Company's investment in Avexa, a \$2.2 million. return from funds under management, and the continued exercise of cost control.

The classification of Zenyth's investment in the demerged entity Avexa as a financial asset at fair value through profit or loss requires that the investment be carried at fair value at each period end, with movements in the carrying value reflected in the income statement for the period.

Avexa's traded share price rose from 14.5 cents as at 30 June. 2005 to 28.5 cents as at 31 December 2005, thereby increasing the value of the 21,062,000 shares held by the Company by \$2,948,680, as reflected in the income statement for the half year then ended.

At 30 June 2006, the last traded Avexa share price was 23 cents per share, thereby necessitating a write down of the carrying

value of the investment by \$1,158,410 which has been recorded in the second half year and included within the fall year result. Based on the Company's intention to distribute all of its shares in Avexa to Zenyth shareholders under the CSL Acquisition Proposal, the investment has been reclassified from a non-current to a current asset in the balance sheet as at 30 June 2006 and 31 December 2005.

The closing cash and cash equivalents position of \$47.6 million. at 31 December 2005 reflected a consemption for the six month period then ended of \$4.1 million, which was in line with Zenyth's expectations as it progresses its lead GM-CSF receptor project. towards the clinic. Merck is responsible for all development costs. on the IL-13 receptor project.

The imbalance between the cash consumption and the operating result for the six months ended 31 December 2005 reflected the non-cash income of \$2.9 million associated with the increase. in carrying value of the investment in Avexa, which rose from \$3.1 million as at 30 June 2005 to \$6.0 million as at 31 December 2005

A summary of relevant performance indicators for periods disclosed is provided in the following table in which the Company's investment. in Avexa has been recorded as a current asset at 30 June 2006. and 31 December 2005 and a non-current asset as at 30 June. 2005

	As at 30 June 2006 \$'000	As at 31 Dec 2005 \$'000	As at 30 June 2005 \$'000
Cash and funds under management	45.753	47.621	51.727
Current assets less current liabilities	47.809	52.001	49.329
Total net assets	49.369	53.368	53.653
Current asset/corrent liability ratio	Ratio	Ratio	Ratio
	-35.8	23.1	18.3
Net tangible assets per share	Cents	Cents	Cents
	39.4	42.6	42.9

3.6 Zenyth - A Disclosing Entity

Zeayth is a 'disclosing eatity' for the purposes of the Corporations Act and as such is subject to regular reporting and disclosure obligations. As a public company listed on ASX, Zenyth is subject to the ASX Listing Rales which require, (subject to a gualified exception in respect of certain classes of confidential information). continuous disclosure to the market of any information of which Zenyth is aware that a reasonable person would expect to have a material effect on the price or value of Zenyth's issued securities.

The ASX maistains records of information which has been publicity disclosed by Zenyth and this information may be inspected at the ASX offices in Melbourne or on the ASX website at www.asx.com.au Copies of this information may also be obtained from the ASX Melbourne offices.

Further information on Zenyth may be obtained from visiting its website at www.zenyth.com.aa

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Section 4 - Profile of Avexa

4.1 Introduction

As the in specie distribution of Avexa Shares forms part of the Total Consideration, your Directors consider it appropriate that Zenyth Shareholders are provided with information in relation to Avexa Limited (Avexa). The information contained in this Section 4 concerning Avexa, including all financial isformation, has been prepared by Zenyth using publicly available information. Avexa has had no involvement in relation to the CSE Acquisition. Proposal, nor has Avexa been involved in preparing or reviewing this Explanatory Booklet. Zenyth does not accept responsibility for any errors, omissions or misstatements in this Section 4 that are attributable to errors, omissions or misstatements in public documents lodged by Avexa with ASX.

4.2 Business Description

Avexa (ASX code: AVX) is an Australian drag-discovery company based in Melbourne, Victoria. Avexa's business is the discovery and development of pharmaceutical medicines for the treatment of serious fauman infectious diseases such as HIV, hepatitis and dreg resistant bacterial infections.

Avexa was formed in 2004 after Zenyth (then Amrad Corporation Limited) undertook a strategic review of its portfolio and concluded that it should focus on its core business of protein and antibody based therapies for inflammatory diseases and cancer. As a result, Amrad's anti-infectives drug portfolio was demerged isto Avexa.

Avexa's commercial strategy is to focus on realising the value in its internal projects in the area of anti-infectives by achieving definitive, well established milestones for each project. Avexal aims to progress its projects as far as possible (at least to the end of proof-of-concept in man) to add maximum value but also considers discussions with potential partners for collaborations. in specific areas to expedite project progress.

In April 2006, Avexa undertook a capital raising through a rights issue, with the intention of using the majority of the net proceeds to accelerate preparations for the Phase III development of AVX754. the company's most advanced project.

4.3 Avexa's Projects

Avexa's main projects include:

· AVX754, a nacleoside reverse traascriptase inhibitor carrently in Phase IIb for the treatment of HIV infection;
· a program focused on discovering inhibitors of HIV integrase for the treatment of HIV infection; and
· an antibiotic to treat drug-resistant bacterial infections.

Set out below is an outline of these main projects.

AVX754

In January 2005, Avexa in-licensed AVX754, a new anti-HIV drug in Phase II development, from Shire Pharmaceuticals Group Plc.

AVX754 inhibits replication of the HIV virus in infected patients. It is a member of a class of compounds known as nucleoside reverse transcriptase inhibitors (NRTIs) which includes drugs such as Combivir®, Zerit®, Videx® and Epivit®. NRTIs stop the HIV virus. from replicating by preventing the virus from copying its genetic. material. NRTIs, together with another class of HIV drugs called protease inhibitors, form the mainstay of current HIV combination therapy. Unfortunately, however, several of the currently used NRTis have side effects which limit their use, in addition, an increasing number of patients have a virus which has become resistant to current NRTIs, and need a new treatment. The profile of AVX754 in both laboratory tests and in the clinical trials completed so far shows that AVX754 is unlikely to result. in the side effects that some other NRTIs cause, giving AVX754. a significant advantage. Furthermore AVX754 is active in vitro against virus which has become resistant to the currently used NRTIs and the indications are that it will also prove to be clinically effective against such virus.

AVX754 has successfully completed four Phase I studies in healthy volunteers and a Phase lia study in 63 HIV-infected patients.

AVX754, also known as apricitabine, commenced a 60 patient Phase IIb trial in 2005. Avexa estimates that the Phase IIb trial will be completed by the end of the fourth quarter of 2006.

Avexa intends to use the majority of the net proceeds of its 2006. rights issue to accelerate preparations for the Phase III development. of AVX754. In particular, Avexa intends to:

Accelerate the preparations for the Phase III trials.
In anticipation of a positive result from the current Phase IIb. trial. Avexa intends to make preparations for Phase III development, iscluding appointing additional staff and making other preparations. for the necessary clinical and regulatory activities. A key element of this preparation is manufacturing bulk stocks of AVX754 capsules. ready for use in Phase @ trials. Several hundreds of kilograms of AVX754 must be manufactured, a process which takes at least six to nice months in total.

· Complete two ancillary studies for AVX754.

To prevent avoidable additional work in the Phase # trials and to meet certain recent developments in requiatory requirements, Avexa aims to complete two ancillary studies for AVX754. A portion of the funds raised by Avexa will be used to complete:

(a) A clinical pharmacology (cardiac) study; and

(b) A tipranavir co-dosing study.

· Initiate a long term extension study for the current Phase Ilb trial.

The current Phase IIb trial will study patients during 48 weeks of therapy. When patients reach 48 weeks, they will be offered continued participation in a follow-on extension study. This extension study will ensure that those patients can continue to be treated with AVX754, which could be a life-saving drug for many of them. The study will also provide continued long term information on the safety of treatment with AVX754. This data will be used as part of the safety data package provided to requiatory authorities.

HIV Integrase Inhibitors

Avexa's HIV integrase program is focused on discovering compounds that inhibit the enzyme HIV integrase. As the name suggests, integrase helps the human immunodeficiency virus integrate into human DNA.

HIV integrase inhibitors represent an entirely new class of compounds for the treatment of HIV. Due to the novel mode of action, they have the potential to be used in combination with existing therapies and to transform the treatment of HIV in a similar way to the introduction of the protease inhibitors in the late 1990s.

Avexa is working on a novel series of compounds that are different from other integrase inhibitors previously described. Avexa's HIV drug development program targets resistant strains of HIV with this new class of drag. A significant proportion of long term patients have become resistant to most or all of the drugs administered. to them. This is important as improvements in the survival time of persons infected with HIV create an ongoing need for new therapies.

Avexa has continued to evaluate molecules for their ability to inhibit the HIV integrase enzyme, sourcing the molecules from both its own laboratory, from the collection at CSIRO and from MNLpharma Etd's PhytoPure library. To facilitate this work Avexa has established its own chemical synthesis laboratory. Avexal scientists also work with scientists at the Shanghai Institute of Organic Chemistry through Avexa's collaboration with that institute. Avexa expects to undertake further preclicical analysis of these molecules in 2006.

An Antibiotic to Treat Drug-resistant Bacterial Infections

The development of antibiotic resistance has resulted in continued market opportunities for novel compounds which act against these resistant strains of bacteria. Cases of resistance to vancomycin, the present drug of last resort for serious bacterial infections, are becoming more frequent. Moreover, the spread of Staphylococcal bacteria which are resistant to methicillin and cause serious. hospital-acquired infections is of immediate concern, particularly in Europe.

Avexa is pursuing a upique approach to overcoming the problem of vancomycin and methicilin resistance. The company is synthesising compounds that target the altered part of the vancomvon-resistant strain of bacteria which gives rise to resistance. These compounds are synthesised in collaboration with the University of Wollongong, and have been supported in part by several Australian Research Coancil and National Health and Medical Research Council grants. These compounds show anti-bacterial activity that is equal, or close, to that of vancomycinin drug-sensitive strains of Staphylococcus aureus (so-called 'golden staph') and show activity against vancomycin-resistant. Enterococcas faecium, a bacterium that can cause serious. infections and has been shown in some instances to be resistant. to current antibiotics, Importantly, these compounds show activity either equal to or better than vancomycin against vancomycin semi-resistant strains of Staphylococcus aureus (S. aureus).

In 2005, Avexa announced that independent analysis had demonstrated that the Avexa series of compounds has activity against bacteria, such as S. aureus (both methicilin-resistant and vancomycin-intermediate sensitive strains of S. aureus) which had been isolated from hospital strains that are resistant to currently available drucs.

A series of lead compounds has been generated through molecular modelling and directed medicinal chemistry, and these compounds are presently being optimised using antibacterial assays and molecular modelling techniques to select a lead molecule for preclinical testing.

Section $4$ – Profile of Avexa continued

4.4 Avexa's Directors

Name, Qualification and Independence Status	Experience and Special Responsibilities
Dr H Nail	Independent non-executive director and Chairman since.
Independent Non-Executive Director and Chairman	7 September 2004. Member of the Avexa Audit Committee.
Dr J Chick	Chief Executive Officer from 7 September 2004.
Executive Director
-Dr-E-Malta	independent non-executive director and member of the Avexa
Independent Non-Executive Director	Aadit Committee appointed on 1 November 2005.
Mr S Cooper	Independent non-executive director and member of the Avexa
Independent Non-Executive Director	Aadit Committee from 18 November 2005; appointed Chair of
	that committee on 20 December 2005.

A brief summary of the professional and academic background of each director is provided below.

Dr Hugh Niall -- Non-Executive Chairman MB, BS, MD (Melb), FRACP

Dr Hagh Niall became Chairman and a Non-Executive Director of Avexa on 23 September 2004. Dr Niall has many years experience in the biotechnology industry in Australia and the United States. From 2003 to 2006, he was Chief Executive Officer of the Australian Stern Cell Centre Limited (ASCC) and from 1995 to 2002 was the Chief Executive Officer of Biota Holdings Limited, a publicly listed company based in Melbourne, whose focus is the discovery and development of new haman antiviral pharmaceuticals.

After completing his medical degree and obtaining post-graduate qualifications in medicine at the University of Melbourne, Dr Niall worked overseas at the National Institutes of Health, Bethesda, Maryland, USA and at Harvard University, where he was an Associate Professor of Medicine. Dr Niall has also held senior appointments with the Howard Florey Institute of Experimental Physiology and with Genentech Inc. a major biotechnology. company is South San Francisco where he was Vice President of Research Discovery.

Dr Niall is the Chair of the Investment Committee of the Genesis Fund of GBS Venture Partners Limited. Chair of the Diabetes Vaccine Development Centre, a Director of Ausgenics Pty Ltd and a Fellow of the Royal Aastralasian College of Physicians.

Dr Julian Chick - Executive Director BSc (Hons), PhD $f(a)$ Trobe)

Dr Julian Chick was appointed as Chief Executive Officer and executive director of Avexa on 7 September 2004. He graduated with a PhD in muscle physiology from La Trobe University in 1998. and joined Zenyth Therapeutics Limited as a Senior Business Development Manager in April 2002.

Prior to joining Zenyth, Dr Chick had five years experience as an investment adviser and financial consultant with Prudential-Bache Secarities, BNP Paribas and Salomon Smith Barney. Dr Chick also spent time working for Foursight Associates as the principal analyst reviewing investment opportunities for private equity investors and venture capitalists.

Dr Errol Malta - Non-Executive Director PhD (Melb), FAICD

Dr Errol Malta is carrently a Director of Australian biotechnology. company Alchemia Ltd and has held previous directorships in two small unlisted Australian biotechnology companies. Overthe last seventeen years. Dr Malta has been employed in the pharmaceutical/biotechnology indestry in drug development. In eight of his 10 years with Amges at their head office in the United States he was Product Development Team Leader responsible for global drug development and commercialisation. for a namber of different molecules. During that time, Dr Maltawas responsible for five successful new-molecule IND submissions to the FDA and other regulatory agencies, subsequent Phase I/II programs and a number of Phase @ and IV trials.

Dr Matta holds a PhD from the University of Melbourne and is a fellow of the Australian Institute of Company Directors. Prior to his industry experience, Dr Malta spent 13 years in academia as Senior Lecturer and Researcher in Pharmacology at the Victorian College of Pharmacy where he published over 50 scientific papers.

Mr Stephen Cooper - Non-Executive Director B Com (Hons), CA Mr Stephen Cooper is a Director of Grant Samuel, a leading independent Australasian investment house, where he provides

corporate finance advice to small and large companies across. a range of industry sectors. Prior to that, Mr Cooper was Senior Manager for KPMG Peat Marwick, Melbourne, in the area of strategic planning and business development.

Mr Cooper holds a Bachelor of Commerce (Hors) from the University of Cape Town and is an Associate of the Institute of Chartered Accountants (Aust) and Associate of the Chartered Institute of Management Accountants (UK).

4.5 Financial Position and Performance of Avexa

(a) Income Statement

The following selected income statement information has been extracted from the Avexa income statements for the year ended 30 June. 2006 (audited and as lodged with ASX on 8 August 2006), the six months ended 31 December 2005 and the year ended 30 June 2005 (audited).

	Year Ended 30 June 2006 (audited) \$'000	Six Months Ended 31 Dec 2005 \$'000	Year Ended 30 June 2005 (audited) \$'000
Licence fee and royalty revense
Other revenues from ordinary activities	738	343	669
Total revenue	738	343	669
Contract research and development costs	(6, 576)	(1, 733)	(4.654)
Employee expenses	(2,533)	(1, 252)	(1,482)
Share-based payment expense	(322)	(59)	(63)
Depreciation	(52)	(27)	(12)
Amortisation of intellectual property	(6,000)	(3,000)	(6,000)
Occupancy costs	(332)	(181)	(210)
Consulting and professional services	(1.089)	(638)	(570)
Travel and accommodation	(405)	(159)	(244)
Raw materials and consumables used	(424)	(227)	(199)
Asset management expenses	(282)	(133)	(318)
Insurance	(169)	(71)	(150)
Other expenses	(584)	(291)	(366)
Loss before tax	(17, 830)	(7,408)	(13, 597)
Income tax expense.
Net loss for the period	(17, 830)	(7, 408)	(13, 597)
Net income recognised directly in equity
Total recognised income and expense for the period	(17, 830)	(7,408)	(13, 597)

Section 4 - Profile of Avexa continued

(b) Balance Sheet

The following selected balance sheet information has been extracted from the Avexa balance sheets as at 30 Jane 2006 (audited and as lodged with ASX on 8 August 2006), 31 December 2005 and 30 June 2005 (audited).

	As at 30 June 2006 (audited)	As at 31 Dec 2005	As at 30 June 2005 (audited)
	\$'000	\$'000	\$'000
Current assets
Cash assets	20,228	11,637	15,727
Receivables	34	33	64
Other	106	142	81
Total current assets	20,368	11,812	15,872
Non-current assets
Intangibles		3,000	6.000
Property, plant and equipment	23.7	233	121
Total non-current assets	23.7	3,233	6,121
Total assets	20,585	15,045	21,993
Current liabilities
Payables	3,357	1,065	687
Provisions	280	192	154
Total current liabilities	3,637	1,257	841
Non-current liabilities
Provisions	28	25	40
Total non-current liabilities	28	25	40
Total liabilities	3,665	1,282	881
Net assets	16,920	13,763	21,112
Equity
issued capital	48,164	34,648	34,648
Accomulated losses	(31, 244)	(20, 885)	(13, 536)
Total equity	16,920	13,763	21,112

(c) Statement of Cash Flows

The following selected cash flow information has been extracted from the Avexa statements of cash flow for the year ended 30 June 2006 (audited and as lodged with ASX on 8 August 2006), the six months ended 31 December 2005 and the year ended 30 June 2005 (audited).

	Year Ended		Year ended 30 June 2005
	30 June 2006	Six Months Ended
	(audited)	31 Dec 2005	(audited)
	\$'000	\$'000	\$'000
Cash flows from operating activities
Cash receipts in the course of operations	283	305	261
Cash payments in the course of operations.	(10, 209)	(4.602)	(7,760)
Interest received	535	343	625
Net cash used in operating activities	(8.891)	(3,954)	(6, 874)
Cash flows from investing activities
Payments for property, plant and equipment	(144)	(136)	(133)
Net cash used in investing activities	(144)	(136)	(133)
Cash flows from financing activities
Proceeds from issue of share capital	14,385		23,521
Costs of raising share capital	(849)		(873)
Consideration for taking on employee entitiements.			-86
Net cash provided by financing activities	13,536		22,734
Net (decrease)/increase in cash held
	4,501	(4.090)	15,727
Cash at the beginning of the financial period	15.727	15,727
Cash at the end of the financial period	20.228	11.637	15,727

4.6 Information on Avexa Shares

Under a prospectus dated 3 April 2006 for a non-renoanceable rights issue of one new share for every four ordinary shares on issue at 24 cents per new share, Avexa issued 39,530,102 new ordinary shares and raised a gross amount of \$9,487,224 before costs and expenses estimated to be in the vicinity of \$869,000.

Immediately prior to the offer contained in the 3 April 2006. prospectus, Avexa raísed additional capital through a placement to institutional and other sophisticated investors of 20,408,000. shares at \$0.24 per share to raise \$4,897,920 before costs and expenses.

The issue of new Avexa Shares as detailed above has resulted in a total issued share capital of 197,854,554 shares as at the date. of this Explanatory Booklet.

As at the date of this Explanatory Booklet there are 9,095,000. options to acquire Avexa Shares on issue as detailed in the following table.

Section 4 - Profile of Avexa continued

Grant Date	Exercise Date	Ехрігу Date	Exercise Price	Number of Options at Date of Explanatory Booklet
12 Nov 2004	份	30 Jane 2009	\$0.40	1,400,000
26 Sep 2005	傝	25 Sep 2010	\$0.40	50,000
26 Sep 2005	固	25 Sep 2010	\$0.19	180,000
26 Sep 2005	(國)	25 Sep 2010	\$0.19	480,000
5 Oct 2005	(iv)	30 Bane 2010	\$0.40	600,000
5 Oct 2005	$\langle \vee \rangle$	30 Bane 2010	\$0.19	500,000
1 May 2006	(vi)	21 March 2011	\$0.40	50,000
1 July 2006	(vii)	30 June 2011	\$0.30	525,000
1 July 2006	(vii)	30 June 2011	\$0.30	710,000
1 July 2006	(viii)	30 Jane 2011	\$0.40	500,000
1 July 2006	(ix)	30 June 2010	\$0.40	300,000
Total employee options				5,095,000
Shire options'				4,000,000
Total options				9.095.000

$(i)$ Exercisable 40% on or after 1 Buly 2005 and 20% on or after each of 1 Buly 2006, 1 Buly 2007 and 1 Buly 2008.

$\langle \hat{p} \rangle$ Exercisable 75% on or after 26 September 2006 and 25% on or after 26 September 2007.

Exercisable 50% on or after each of 26 September 2006 and 26 September 2007. $(i)$

Exercisable 40% on issue and 20% on or after each of 5 October 2007, 5 October 2008 and 5 October 2009. $(i \vee)$

$(\vee)$ Exercisable 50% on or after each of 3 July 2006 and 1 July 2007.
Exercisable 75% on or after 21 March 2007 and 25% on or after 21 March 2008. $(vi)$

Exercisable 50% on or after each of 1 July 2007 and 1 Baly 2008. $(vii)$

Exercisable 40% on or after 1 Buly 2007 and 20% on or after each of 1 Buly 2008, 1 Buly 2009 and 1 Buly 2010. $(vii)$

Exercisable 40% on or after 1 Buly 2006 and 20% on or after each of 1 Buly 2007, 1 Buly 2008 and 3 Buly 2009. $(ix)$

The exercise price of the 4,000,000 options issued to Shire Biochera Inc., will be equal to the volume weighted average price of Avexa shares over the period commencing 30 business days before and ending 30 business days after the ASX trading day on which the results of the Company's Phase (b) study in respect of the compound AVX754 are announced. The exercise period for these options commences on 17 January 2008 and expires on the earlier of 17 January 2012 or the termination of the Shire Licence Agreement.

4.7 Avexa Directors - Interests in Avexa Securities

Avexa Directors, and their related entities, held the following interests in Avexa shares as at the date of this Explanatory Booklet.

Director	Ordinary Shares Number	Options to Acquire Ordinary Shares Number
Dr H Niall	1,125,000
Dr. J. Chick	625,000	1,100,000
Or E Matta	102,500	$\cdots$
Mr. S. Cooper	212.500	$\mathbf{r}$

Following shareholder approval at the Avexa 2005 Armual General Meeting on 5 October 2005, Dr Chick was issued:

500,000 options exercisable 50% on or after each of 1 July 2006 and 1 July 2007, with an exercise price of \$0.19 and expiry date of 30 June 2010; and
- 600,000 options exercisable 40% on issue and 20% on or after each of 5 October 2007, 5 October 2008 and 5 October 2009, with an exercise orice of \$0.40 and expiry date of 30 June 2010.

4.8 Substantial Shareholders

The Corporations Act provides that a person has a "substantial holding" in a company if the votes attached to voting shares of that company in which the person has a relevant interest is 5%. or more of the total number of votes attaching to all voting shares. in that company. The substantial shareholders in Avexa as at 4 September 2006 are as follows.

	Shareholding
Date of	Date Released	Substantial	Number of	Percentage
Notice	by ASX	Shareholder Name	Shares	Disclosed
30/08/2006	30/08/2006	Zeriyth Therapeutics Limited	21.062.000	10.65%
17/05/2006	17/05/2006	Fibre Optics (Aust) Pty Ltd - a wholly owned
		subsidiary of Circadian Technologies Limited	23.915.365	12.09%
03/04/2006	03/04/2006	Passport Management, ELC	14.500.000	9.14%

4.9 Trading of Avexa Shares

A sammary of Avexa's share price and volumes history from 1 January 2006 to 4 September 2006 is provided in the following graph.

The following further information in relation to Avexa Shares is provided:

· the last recorded sale price of Avexa Shares on ASX on 11 September 2006, being the date before the day that this Explanatory Booklet was lodged with ASIC for registration. under section 43.2(6) of the Corporations Act, was \$0.21;
· the highest sale price of Avexa Shares on ASX during the three months prior to 11 September 2006 was \$0.26 on 7 July 2006;
the lowest sale price of Avexa Shares on ASX during the three months prior to 11 September 2006 was \$0.195 on 24 July. 2006 and between 27 July and 2 August 2006; and
the last recorded sale price of Avexa Shares on ASX immediately. prior to the announcement of the CSL Acquisition Proposal was \$0.24 on 14 July 2006.

4.10 Rights Attaching to Avexa Shares

The rights attaching to Avexa Shares arise from a combination of the Avexa Constitution, statute and general law.

The Avexa Shares to be transferred to Scheme Shareholders ander the Special Distribution will rank equally and have the same rights as all other Avexa shares on issue. The Avexa Constitution sets out rights attaching to Avexa Shares and the following is a summary of key rales in the Constitution of Avexa.

Section 4 - Profile of Avexa continued

(a) Votino

Subject to any restriction on voting imposed by the ASX Listing Rules or any restriction agreement entered into between Avexa and an Avexa Shareholder, every Avexa Shareholder present in berson or by proxy, attorney or representative at a meeting of shareholders has one vote on a show of hands and one vote on a poll for every Avexa Share held. A poll may be demanded by the Chairman of the meeting, an Avexa Shareholder or shareholders who together hold at least five percent of the votes that may be cast on the resolution on a poll, or who together hold voting shares paid up to a value of not less then five percent of the total sum paid up on all voting Avexa Shares.

(b) General Meetings

Each Avexa Shareholder is entitled to receive notice of and to attend general meetings of Avexa and to receive all notices, accounts and other documents required to be sent to Avexa shareholders under the Constitution of Avexa, the Corporations Act or the ASX Listing Rules

(c) Dividends

Where dividends are payable out of Avexa's profits, they will be declared by the Avexa Board. Dividends declared will (subject to any special rights or restrictions attaching to a class of Avexa. Shares created ander any arrangement as to dividend) be payable. on Avexa Shares in accordance with the Corporations Act.

(d) Transfer of Avexa Shares

An Avexa Shareholder may transfer Avexa Shares by a proper transfer effected in accordance with any computerised or electronic. system established or recognised by the ASX or the Corporations Act for the purpose of facilitating transfers in shares or by an instrument in writing in a form approved by the ASX or in any other usual form or in any form approved by the Avexa Board. The Avexa Board may refase to register a transfer of Avexa Shares where the refusal to register the transfer is permitted under the Constitution of Avexa and the ASX Listing Rules.

(e) Issue of Shares

The Avexa Board may (subject to the restrictions on the issue of Avexa Shares imposed by the Constitution of Avexa, the ASX Eisting Rules or the Corporations Act) issue, grant options in respect of, or otherwise dispose of further Avexa Shares as they see fit.

(f) Winding Up

Subject to any special or preferential rights attaching to any class or classes of Avexa Shares, on a winding up of Avexa a liquidator may, with the authority of a special resolution of the Avexa

Shareholders, divide among the Avexa Shareholders in kind the whole or any part of the property of Avexa in proportion to the Avexa Shares held by them respectively. The liquidator may for that purpose set the value he or she considers fair upon any property to be so divided, and may determine how the division is to be carried out as between the Avexa Shareholders. The liquidator may, with the sanction of a special resolution of the Avexa Shareholders, vest the whole or any part of the assets in trust for the benefit of Avexa Shareholders as the liquidator thinks fit, but so that no Avexa Shareholder is compelled to accept any Avexa Shares or other securities in respect of which there is any liability.

(g) Shareholder Liability

As the Avexa Shares are fully paid shares, they are not subject to any call for money by the Avexa Board and will therefore not become liable for forfeiture.

(h) Alteration to the Constitution

The Constitution of Avexa can only be amended by a special resolution passed by at least three quarters of the votes of the Avexa Shareholders present and voting at a general meeting. At least 28 days written notice specifying the intention to propose the resolution as a special resolution must be given.

(i) ASX Listing Rules

As Avexa is tisted on ASX, despite anything in the Constitution of Avexa, if the Listing Rules prohibit an act being done, the act must not be done. If the Listing Rules regaire an act to be done or not to be done, authority is given for that act to be done or not to be done, and if a provision is required in the Constitution. of Avexa by the Listing Rules, the Constitution will be treated as containing that provision. If any provision of the Constitution of Avexa becomes inconsistent with the Eisting Rules, the Constitution will be treated as not containing that provision to the extent of the inconsistency.

4.11 Dividends

Since the commencement of operations on 1 July 2004, Avexa has beither paid nor proposed the payment of any dividends.

4.12 Risks Associated With Holding Avexa Shares

Zenyth Shareholders should be aware that there are risks associated with any investment in the sharemarket. The value of Avexal Shares may flactuate depending not only on the performance of Avexa but also a number of factors beyond Avexa's influence, including worldwide economic and political conditions, general stock market and economic confidence, and the carrent unrest in the Middle East.

Avexa is able to adopt contingency plans and safeguards to mitigate and manage some of the risk factors affecting its stock. market performance, however, other risks are beyond Avexa's influence. The following is a summary of general and specific risks pertinent to holding an investment in Avexa, any one or a combination of which could affect Avexa adversely and thus the value of any investment in Avexa. The Zenyth Board is unable to speculate as to the extent of such adversity, and thus an investment in Avexa should be regarded as speculative.

(a) General Risk Factors

Economic Conditions

The performance of Avexa may be significantly affected by changes in economic conditions, and particularly conditions which affect. the biotechnology industry. Profitability of the business may be affected by factors such as market conditions, interest rates, inflation and consumer demand.

Geo-political Factors

Avexa may be affected by the impact that geo-political factors. have on the various world economies or the Australian economy or on financial markets and investments generally or specifically.

Australian and Foreign Government Policies and Legislation

Avexa may be affected by changes to government policies and legislation, including those relating to the biopharmaceutical and pharmaceutical industry, property, the environment, taxation and the regulation of trade practices and competition, government. grants and incentive schemes.

Sharemarket Conditions

Avexa, being a company listed on ASX, is subject to the market forces that influence the broad sharemarket trends and the price of securities of individual companies. Accordingly, the price of Avexa shares traded on ASX is subject to fluctuation.

Other

Other risk factors include those normally found in conducting business, including litigation resulting from the breach of agreements or in relation to employees (through personal injuries, industrial matters or otherwise) or any other cause, strikes, lockouts, loss of service of key management or operational personnel, non-insurable risks, delay in resumption of activities after reinstatement following the occurrence of an insurable risk. and other matters that may interfere with the business or trade of Avexa.

(b) Specific Risk Factors Technical Risks

Avexa has a number of projects that could give rise to products. No asserances can be given that Avexa's research will give rise to any development of a commercially successful product.

Competitor Risks

No assignmees can be given that any products that Avexa does produce will successfully compete with other products. either currently on the market or expected to enter the market in the filtere.

Financial Risks

The ability of Avexa to implement its business strategy may depend in part on its ability to continue to raise additional funds and/or to secure appropriate partnering or out-licensing arrangements. No assurances can be given that such funding will be available, or that it will be available on terms attractive to Avexa.

Key Employee Risks

The future success of Avexa may depend in part on its continued access to highly qualified scientific, technical and managerial personnel. Competition for such staff is intense. Further, much of the intellectual property and developed know-how resides in Avexa's scieatific staff or those under contract. The loss of key staff could have a material adverse effect on Avexa. While Avexa seeks to ensure that the services of key personnel are retained. no assurances can be given that Avexa will continue to retain and attract key staff as required by the business.

Intellectual Property Risks

Avexa's prospects rely fundamentally on its intellectual property. portfolio. Any restrictions on Avexa's rights to use the technology contained in its patents in any jurisdiction will impede, or prevent, Avexa's ability to achieve the commercialisation of the relevant. technology in those jurisdictions. No assurances can be given that existing or future patents or patent applications which Avexa. relies upon will not be challenged in the Courts, nor that any patents granted will withstand any subsequent legal challenge.

Regulatory Risks

Major changes in regalatory legislation or policy could affect the timing and costs of clinical trials. Although Avexa may continue to discuss its clinical development program with appropriate regulatory bodies, no assurances can be given that significant anexpected changes in regulatory legislation or policy will not occur in the fature.

Section 4 - Profile of Avexa continued

Required Primary Endpoint is Not Met

The primary clinical endpoint for Avexa's most advanced project AVX754 Phase IIb triat is a mean decrease in the level of virus in the blood of 0.6 log after 21 days treatment. If this primary endpoint is not met, the fature development of AVX754 may need to be re-assessed.

Unexpected Severe Adverse Effects

Although no serious adverse effects associated with AVX754 have been reported by Avexa to ASX as at 4 September 2006. under Avexa's continuous disclosure obligations, the occurrence of severe unexpected adverse effects could have a significant impact upon the fature clinical development of AVX754.

Supply of Material

Clinical development of AVX754 requires a continued supply of material from external manufacturers. Although Avexa has reported that some stocks of AVX754 are already in place, and Avexa may continue to work to secure an ongoing supply, unexpected events may interrupt the supply of material and affect the timing and/or cost of the clinical trials.

4.13 Avexa - A Disclosing Entity

Avexa is a lidisclosing entity' for the purposes of the Corporations Act and as such is subject to requiar reporting and disclosure obligations. As a public company listed on the ASX, Avexa is subject to the ASX Listing Rules which require, (subject to a qualified exception in respect of certain classes of confidential information) continuous disclosure to the market of any information. of which Avexa is aware that a reasonable person would expect. to have a material effect on the price or value of Avexa's issued securities.

The ASX maintains records of information which has been publicly disclosed by Avexa and this information may be inspected. at the ASX offices in Melbourne or on the ASX website at www.asx.com.au Copies of this information may also be obtained from the ASX Melhourne offices

Farther information on Avexa may be obtained from visiting its website.

Section 5 - Information from CSL

The information in this Section 5 has been prepared by CSL and CSL is responsible for its accuracy.

5.1 Overview of CSL and its Subsidiaries

(a) About CSL and its Subsidiaries

CSL is a global, specialty biopharmaceutical company that develops, manufactures and markets products that improve lives by preventing or treating serious medical conditions.

CSL is headquartered in Melbourne, Aastralia, is listed on ASX and its shares are widely held.

CSL and its subsidiaries includes the operations of CSL Biotherapies, CSL Bioplasma, ZLB Behring (incorporating ZLB Plasma Services) and CSL Research and Development. With major manufacturing sites in Australia. Germany, Switzerland and the United States of America, CSL and its subsidiaries have over 7000 employees working in 26 countries.

CSL's R&D activities include new product development, flu vaccine improvements, as well as line extensions of our extensive plasma product portfolio. R&D skills are closely aligned with manufacturing operations with Centres of Excellence in Melbourne at Parkville and Broadmeadows (Australia), Marburg (Germany), Bern (Switzerland) and Kankakee (USA). Parkville is the centre for new product development where CSL is developing novel protein based medicines for life-threatening haman diseases with a focas in immunology, cancer and inflammation. CSL's investment in R&D is directed towards products in these areas arising from our core technologies in plasma fractionation, vaccinology, ISCOMATRIX* adjavant and recombinant proteins, particularly antibodies. CSL collaborates closely with Australian universities and medical research institutes working in its areas of expertise.

Further information about CSL Limited can be found at www.csl.com.au

(b) CSL's Directors

Details of the directors of CSL are set out below.

Peter H Wade, FCPA, FAICD - (age 72) Finance, Management (resident in Victoria) Chairman

Mr Wade was elected to the CSL Board in 1994 and became Chairman in 1999. He had previously served CSL as a Commissioner and Director from 1985 to 1993 including a period as Acting Chairman during 1988. Mr Wade was formerly a Director of Tabcorp Holdings Limited and Managing Director, North Limited. Mr Wade will retire from the CSL Board prior to

CSL's next annual general meeting in October 2006 and will be succeeded by Elizabeth Alexander as Chairman.

Brian A McNamee, MB, BS, FAICD - (age 49) Pharmaceuscal Industry, Medicine (resident in Victoria) Chief Executive Officer and Managing Director

Dr McNamee was appointed to the CSL Board in 1990 and is the Chief Executive Officer and Managing Director. He is a Director of the Peter MacCallum Cancer Foundation Ltd and Gen-Probe Inc, a US company.

Antoní M Cipa, B.Bus (Acc), Grad.Dip (Acc), CPA, AC(S - (age 51). Finance fresident in Victoria) Einance Director

Mr Cipa was appointed to the CSL Board as Finance Director in August 2000. Mr Cipa commenced his employment at CSL in 1990 as Finance Manager. He was instrumental in the float of the Company in 1994 at which time he was appointed Chief Financial Officer. Prior to joining CSL, Mr Cipa was employed at large public companies where he had significant exposure to mergers and acquisitions.

John Akehurst, MA (Oxon), FIMechE - (age 57). Engineering, Management (resident in Western Australia)

Mr Akeharst was appointed to the CSL Board in April 2004. After graduating in Eagineering from Oxford Baiversity, he has had 30 years' experience in the international hydrocarbon industry, most recently as Managing Director and CEO of Woodside Petroleum Etd. Prior to this, he held a number of engineering and management. positions with the Royal Dutch/Shell Group of Companies. Mr Akeharst is a Director of Alinta and of Coogee Resources Limited. He is Chairman of Indigo Energy Ltd, a Director of Biostarch Technologies Ltd and a former Director of Oil Search Limited. He is also a Director of the University of Western Australia Business School and of Yoath Focus, a charitable organisation dedicated to the prevention of youth suicide.

Elizabeth A Alexander, AM, BCom, FCPA, FCA, FAICD - (age 63). Accounting (resident in Victoria)

Miss Alexander was appointed to the CSL Board in July 1991. She is a Director of Boral Limited and D.B. RREEF. She is a Member of the Takeovers Panel, Deputy Chairman of the Financial Reporting Council and past National President of the Australian Society of Certified Practising Accountants and of the Australian. Institute of Company Directors. She is Chairman of the Board of Advice to the Salvation Army (Southern Command), is Deputy Chairman of the Winston Churchill Fellowship Trust and Chairman of the Finance Committee of Melbourne University.

lan A Renard, BA, LLM, FAICD - (age 60) Law (resident in Victoria)

Mr Renard was appointed to the CSL Board in August 1998. For many years he practised in company and commercial law. He is a Director of Hillview Quarries Pty Ltd, SP Australia Networks (Distribution) Ltd and SP Australia Networks (Transmission) Ltd. Mr Renard is Chancellor of the University of Melbourne.

Maurice A Renshaw, 8.Pharm. - (age 59)

International Pharmaceutical Industry (resident in New Soath Wales)

Mr Renshaw was appointed to the CSL Board in July 2004. Formerly he was Vice-President of Pfizer Inc. Executive Vice-President, Pfizer Global Consumer Group and President of Pfizer's Global Consumer Healthcare Division. Prior to his positions in Pfizer, Mr Renshaw was Vice-President of Warner Lambert Co and President of Parke-Davis USA. Mr Renshaw has had more than thirty years experience in the international pharmaceutical industry.

Kenneth J Roberts, AM, FRACP (Hon), BEc, FCPA, FAIM, FAICD, - (age 68)

International Pharmaceutical Industry, Management, Marketing, Human Resources (resident in New South Wales)

Mr Roberts was appointed to the CSL Board in February 1996. Formerly, he was Chairman and Managing Director of Wellcome Australasia and Director of Marketing Development for the Wellcome worldwide grosp.

Mr Roberts is Chairman of the Royal Australasian College of Physicians Research and Education Foundation and Start-up Aastralia Pty Ltd. He is also Chairman of the Boards of the Aastralian Genome Research Facility Ltd and the Australian Phenomics Facility and Deputy Chairman of IMB Com Pty Ltd, the University of Queensland's biotechnology transfer company.

Arthur C Webster, BVSc. DipBact (Lond) - (age 62) Asimal Health Industry, Commerce (resident in New South Wales)

Dr Webster was appointed to the CSL Board in March 1998. He is Chairman of four private Australian companies. He is a Council Member of both the Postgraduate Foundation in Veterinary Science and the Veterinary Science Foundation, University of Sydney. Dr Webster was formerly Technical Director thes Manading Director of the animal health company. Cyanamid Webster Pty Ltd, and a Member of the Board of Governors, University of Western Sydney.

John Shine, AO, FAA - (age 60)

Pharmaceutical Industry, Medicine (resident in New South Wales).

Professor Shine was appointed to the CSL Board in June 2006. He is Executive Director of the Garvan Institute of Medical Research and a Board Member of the Garvan Research Foundation. He is Professor of Molecular Biology and Professor of Medicine at the University of NSW, and a Director of many scientific research and medical bodies throughout Australia. Professor Shine was also Chairman of the National Health and Medical Research Council (NHMRC) and a member of the Prime Minister's Science. Engineering and Innovation Council (PMSEIC) up to 30 Jane 2006.

David J Simpson - (age 66)

Finance and Management (resident in Victoria)

Mr Simpson was appointed to the CSL Board in September 2006. He is a Fellow of the CPA Australia. Mr Simpson is the non-executive Chairman of Aristocrat Leisure Limited and a Director of Lighthouse Foundation. For many years Mr Simpson. was Finance Director of Tabcorp Holdings Limited and before that Executive General Manager Finance of Southcorp Holdings Ltd.

5.2 Rationale for the CSL Acquisition Proposal

CSL believes that the acquisition of Zenyth provides CSL with additional recombinant antibody targets in early stage development. and scientists specialising in recombinant antibody design, production and testing. The acquisition of Zenyth complements CSL's existing world-leading research group and deepens CSL's focus and commitment to growth through innovation. Zenyth's prime therapeutic focus is in immunology and inflammation which is in keeping with CSL's interests and capabilities. The intellectual property assets held by Zenyth bolsters CSE's R&D portfolio of protein based biological medicines to treat serious human diseases. Zenyth's early stage research combined with CSL's track record in product commercialisation enhances prospects for product success.

5.3 Post-acquisition Intentions of CSL

This Section 5.3 sets out CSL's current intentions in relation to:

· the continuation of the basiness of Zenyth;
· any major changes to the business of Zenyth and any redeployment of the fixed assets of Zenyth; and
· the future employment of the present employees of Zenyth,

if the CSL Acquisition Proposal is completed and CSL acquires all of the Zenyth Shares.

Section 5 - Information from CSL continued

These intentions are based on the information concerning Zenyth, its basiness and the general business environment which is known to CSL at the time of the preparation of this Explanatory. Booklet, which is limited to publicly available information and a firnited due diligence review of certain non-public information provided by Zenyth.

Final decisions regarding these matters will only be made by CSL in light of information and eircumstances at the relevant time. Accordingly, the statements set out in this Section 5.3 are of currest intention only, which may change as new information. becomes available to CSL or as discurristances change.

(a) General Operational Review

As stated above, as at the date of this Explanatory Booklet, CSL's knowledge of the assets and operations of Zenvth is limited to public information and certain limited non-public information.

If CSL acquires all of the Zenyth Shares, CSL intends to conduct a detailed review of Zeayth's businesses, assets, operations and personnel. This review will apply quantitative and qualitative factors to measure performance and areas for potential growth, improvement, investment and integration into CSL's operations.

Subject to the outcome of the general operational review, it is the present intestion of CSL to combine the research groups of both companies with the aim of ensuring that ongoing progress of projects of importance to both companies continues to be made.

CSL is looking forward to working closely with Merck and CAT who are collaborating with Zenyth on two pre-clinical projects.

CSL is also keen to become more closely associated with Zenyth's other Aastralian institutional collaborators, in particular the Walter and Eliza Hall Institute of Medical Research, LICR and the Ougensland Institute of Medical Research.

CSL is not aware of the existence of any material fixed assets. of Zenyth, and accordingly has not formed any intentions in that regard (whether regarding redeployment or otherwise).

Except as stated in this Section 5.3 and subject to the outcome of the detailed operational review, CSL does not have any other specific intentions in relation to the continuation of, or any major changes to, the business of Zenyth.

(b) Intentions Regarding Corporate Head Office

The general operational review described in Section 5.3(a) will include a detailed review of corporate overhead costs, and CSL will consider rationalising some of Zenyth's head office functions and arrangements following the outcome of the review. This review may lead to a limited number of redundancies. amongst the existing employees from the Zenyth head office, given deplication with CSL's head office.

CSL is not in a position to determine exactly how many employees may be affected in this way, nor the full nature or timing of any such redundancies, until it has completed its review of Zenyth's operations.

(c) Other Corporate Matters

Following the Effective Date for the Share Scheme, it is intended that CSL would:

arrange for Zenyth to be removed from the official list of ASX: and
· reconstitute the Board of Zenyth with nominees of CSL together, at least in the initial period of up to six months, with the current Chairman and Chief Executive Officer of Zenyth.

(d) Option Scheme Not Effective

If the Share Scheme becomes Effective but the Option Scheme does not become Effective, CSL intends to offer Zenyth Opticahoiders cash in return for the cancellation of their Options. (on the same basis as the cash consideration available under the Option Scherne). Following this process, it is intended that any outstanding Zenyth Options will be compelsorily acquired by CSL in accordance with the compulsory acquisition requirements in Chapter 6A of the Corporations Act.

5.4 CSL's Funding Arrangements

The aggregate cash consideration that CSL will be regaired to pay to Zenyth Shareholders if the Share Scheme proceeds is approximately \$102.6 million (Aggregate Cash Sum). The Aggregate Cash Sum will be satisfied by the payment of cash (in Australian dollars).

The necessary funds to be made available to CSL to pay the Aggregate Cash Sam and CSE's transaction costs will be sourced from the CSL Group's cash resources (which includes cash at bank and investments readily convertible to cash) (Cash Resources). As at the date of this Explanatory Booklet, CSE's Cash Resources are in excess of \$500 million. The Aggregate Cash Sum does not take into account any Zenyth Shares that may be issued due to the exercise of Options prior to the Share Scheme. Record Date. However, CSL's Cash Resources are sufficient to accommodate any increase in the Aggregate Cash Sum arising from the issue of new Zenyth Shares on exercise of any or all of Zenyth's Options prior to the Share Scheme Record Date.

There are no restrictions to CSL's access of the Cash Resources.

On the basis of the arrangements described above, CSL is of the opinion that it has reasonable grounds for bolding the view, and holds the view, that it will be able to provide the Aggregate Cash. Sam and any increases to that sum arising from the issue of new Zenyth Shares on exercise of any or all of Zenyth's Options prior to the Share Scheme Record Date.

5.5 Information on Zenyth Securities

(a) CSL's interest in Zenyth Securities

As at the date of this Explanatory Booklet (Booklet Date), CSL and its associates do not have a relevant interest in any Zenyth Shares or Zenyth Options.

Accordingly, as at the Booklet Date, CSL had no voting power in Zenyth.

(b) Acquisitions of Zenyth Securities by CSL or its Associates

In the four months prior to the Booklet Date, neither CSL nor any of its associates have provided, or agreed to provide, consideration for Zenyth Shares under a parchase or agreement.

(c) Prices Paid for Zenyth Shares

In the four months prior to the Booklet Date, neither CSL nor any of its associates have paid any price or consideration for Zenyth Shares.

(d) Pre-Scheme Benefits

in the four months prior to the Booklet Date, neither CSL nor any of its associates have provided any benefit, or agreed to provide any benefit, to a person to induce them to vote in favour of the CSL Acquisition Proposal or to dispose of their Zenyth Shares, other than the agreement under the Deed Poll to pay the Cash Consideration ander the CSL Acquisition Proposal if it becomes Effective.

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Section 6 - Taxation Implications

The Directors Zenyth Therapeutics Limited 576 Swan Street Richmond Victoria 3121

Tav 147 Collins Street Melbourne Victoria 3000

GPO Box 2291U Melbourne Victoria 3001 Anetrolia

ABN: 51 194 660 183 Telephone: +61 3 9288 5555 Facsimile: +61-3-9288-6666 DX: 30824 Melbourne www.kpmg.com.au

14 August 2006

Dear Sirs

Australian Income Tax implications for Zenyth Shareholders

1. Introduction

This letter provides a summary of the Australian income tax implications for Zenyth Shareholders arising from the proposed Special Distribution and Share Scheme, which form part of the CSL Acquisition Proposal.

The tax implications arising for Zenyth Optionholders from the proposed Option Scheme are not addressed in this letter. Optionholders should seek their own independent tax advice.

The comments below are relevant only to Zenyth Shareholders who hold their Zenyth Shares as capital assets for the purpose of investment. The comments do not apply to Zenyth Sharehoiders who hold their Zenyth Shares in connection with the conduct of a business or who acquired the Zenyth Shares for the purpose of resale at a profit rather than investment.

The following summary is intended only for Australian resident Zenyth Shareholders. Zenyth Shareholders who are not resident in Australia for income tax purposes should consider tax consequences under the laws of their country of residence, as well as under Australian law, arising from the proposed transactions.

The discussion contained in this summary is of a general nature only and does not take into account the specific circumstances of any Zenyth Shareholder. Our comments are based on the Australian tax laws in force at the date of this advice.

Zenyth Shareholders should seek their own independent advice regarding the tax implications arising from participation in the CSL. Acquisition Proposal in light of current tax laws and their particular circumstances.

Terms which are defined in the Explanatory Booklet have the same meaning in this letter unless the context requires otherwise.

2. Key Elements of the CSL Acquisition Proposal

As set out in Section 1 of the Explanatory Booklet, CSL proposes to acquire all of the Zenyth Shares on issue for \$0.82 cash per Share through a scheme of arrangement between Zenyth and its Shareholders (i.e. the Share Scheme).

It is proposed that on the Implementation Date, immediately before the implementation of the Share Scheme, Zenyth Shareholders will participate in a pro-rata in specie distribution of all the shares that Zenyth holds in Avexa. If approved the Special Distribution will result in eligible Zenyth Shareholders receiving, in addition to the cash payment from CSL of \$0.82 per Zenyth Share, approximately one Avexa Share for every six Zenyth Shares. This in specie distribution is to be undertaken by way of capital reduction by Zenyth.

The Special Distribution and the Share Scheme give rise to income tax implications for Zenyth Shareholders. The income tax implications associated with these transactions are discussed below.

KPMG, an Australian partnership, is part of the KPMG international network. KPMG international is a Swiss cooperative. Liability limited by a scheme approved under Professional Standards Legislation.

3. Special Distribution

3.1 Tax Implications for Zenyth Shareholders

Where the Special Distribution is approved by Zenyth Shareholders, each Zenyth Shareholder will receive a return of capital in the form of an in specie distribution of Avexa Shares, based on their holding of Zenyth Shares at the Record Date. The entire distribution will represent a return of capital and no component of the distribution will constitute a dividend.

No amount will be included in the assessable income of the Zenyth Shareholder as an immediate result of the Special Distribution provided the value of the Avexa Shares received does not exceed the Zenyth Shareholder's capital gains tax ("CGT") cost base of the Zenyth Shares held.

The CGT cost base of Zenyth Shares held by Zenyth Shareholders will be reduced by the market value of the Avexa Shares received as part of the Special Distribution. To the extent the market value of the Avexa Shares received by a Zenyth Shareholder exceeds the Zenyth Shareholder's CGT cost base in the Zenyth Shares, the excess will be assessed as a capital gain. A CGT discount may be available in these circomstances as discussed at 4.2 below.

The market value of the Avexa Shares for these purposes will be determined by Zenyth and Zenyth will advise Zenyth Shareholders accordingly. Zenyth intends to determine the market value based on the volume weighted average price of the Avexa Shares during the five trading days immediately preceding the implementation Date.

Given the Zenyth Shareholders' proposed entitiement to approximately one Ayexa Share for every six Zenyth Shares they hold and the relative historical share prices of Zenyth and Avexa. Zenyth does not expect that the value of Avexa Shares received will exceed a Zenyth Shareholder's CGT cost base in the Zenyth Shares and give rise to a capital gain. However, each Zenyth Shareholder will need to consider their particular CGT cost base profile.

Zenyth Shareholders that participated in the demerger transaction in September 2004, where Avexa was demerged from Zenyth (then Amrad Corporation Ltd), need to first consider the CGT cost base adjustment to the Zenyth Shares arising from the demerger before taking into account the cost base adjustment arising from the proposed Special Distribution, in determining whether a capital gain will arise as a result of the Special Distribution.

The adjustment to the CGT cost base of Zenyth Shares discussed above is relevant for the purposes of calculating any capital gain or loss under the Share Scheme (refer discussion at section 4 below).

3.2 Cost Base of Avexa Shares Received

Zenyth Shareholders will obtain a CGT cost base in the Avexa Shares equal to the market value of the Avexa Shares. The market value of the Avexa Shares will be determined by Zenyth by reference to the five-day volume weighted average price of the Avexa Shares on the ASX for the five trading days up to the implementation Date.

Zenyth Shareholders will be taken to have acquired the Avexa Shares at the Implementation Date.

Illustrative Example 1 - Return of Capital no Capital Gain

An individual Zenyth Shareholder holds 60,000 Zenyth Shares at Record Date with a CGT cost base of \$0.60 per Share. The Zenyth Shareholder receives 10,000 Avexa Shares under the Special Distribution. Assume for the purposes of this example that the market value of the Avexa Shares based on the five-day volume weighted average price is \$0.24 per share.

Cost base of Zenyth Shares (60,000 x \$0.60)	\$36.000
Less: Return of capital $(10,000 \times $0.24)$	(52,400)
Adjusted cost base of Zenyth Shares	\$33.600
Cost base of Avexa Shares	\$2.400

Section 6 - Taxation Implications continued

The Zenyth Shareholder's CGT cost base in the Zenyth Shares is reduced by the market value of the Avexa Shares received and the Zenyth Shareholder receives a CGT cost base in the Avexa Shares equal to their market value.

4. Share Scheme

4.1 Capital Gain or Capital Loss

The Share Scheme will result in a disposal by way of transfer of Zenyth Shares by Zenyth Shareholders to CSL. The transfer will constitute a CGT Event for Australian CGT purposes. No CGT rollover relief will be available. The CGT Event should occur on the Implementation Date.

A capital gain will arise for a Zenyth Shareholder on the disposal of the Zenyth Shares if the cash consideration received (i.e. \$0.82 per share) exceeds the CGT cost base of the Zenyth Shares to the Zenyth Shareholders. The CGT cost base is generally the purchase price of the Zenyth Shares plus any incidental costs of acquisition and disposal. As discussed above, the CGT cost base for each Zenyth Share will need to be adjusted for the impact of the demerger transaction in September 2004 (if relevant to the particular Zenyth Shareholder) and for the impact of the capital return associated with the Special Distribution.

A capital loss will arise for a Zenyth Shareholder on the disposal of the Zenyth Shares where the cash consideration received is less than the reduced cost base of the Zeavth Shares.

Capital gains and capital losses of a taxpayer in a year of income are aggregated to determine whether the taxpayer has made a net capital gain. Any net capital gain is included in assessable income and subject to income tax. However, a CGT discount may be available to reduce the taxable capital gain (refer discussion below). Capital losses may not be applied against other income for income tax purposes but may be carried forward and offset against future capital gains.

4.2 CGT Discount

In general, if the Zenyth Shares have been held for less than 12 months before the disposal, the capital gain or loss on the disposal of the Zenyth Shares will be calculated as the difference between the cash proceeds received for the Zenyth Shares and the adjusted cost base of the Zeayth Shares.

Individuals and trusts who have held the Zenyth Shares for at least 12 months prior to the disposal of the Zenyth Shares to CSL should be eligible to claim the CGT discount when calculating the capital gain on disposal of their Zenyth Shares. Individuals and trusts will be entitled to a CGT discount of 50%, meaning that only half of any net capital gain for the income year would be included in that individual's or trust's assessable income.

importantly, trustees should seek specific advice regarding the tax consequences of distributions made in respect of a trust which is attributable to a discounted capital gain.

Superannuation funds should be entitled to a CGT discount of 33%. Companies are not eligible for the CGT discount.

Illustrative Example 2 - Capital Gain on Disposal, with CGT Discount

Using the same facts in Illustrative Example 1 above, assume the individual Zenyth Shareholder acquired the Zenyth Shares in March 2005 and has therefore held the Zeayth Shares for more than 12 months.

Cash proceeds received on disposal (60,000 x \$0.82)	-\$49.200
Eess: Cost base of Zenyth Shares (\$36,000 - \$2,400)	$($ \$33.600)
Capital gain before 50% CGT discount	\$15.600
Capital gain after 50% CGT discount	\$7.800

In calculating the CGT discount any indexation of the cost base is ignored. CGT indexation is available for shares acquired before 21 September 1999. An individual Zenyth Shareholder who acquired the Zenyth Shares before that time has the choice of applying indexation to the cost base (up to the September quarter 1999) or applying the CGT discount, when calculating any assessable capital gain.

Illustrative Example 3 - Capital Loss on Disposal

Using the same facts in Illustrative Example 1 above, but the individual Zenyth Shareholder had a cost base immediately prior to the return of capital from the Special Distribution of \$1.00 per share.

Cash proceeds received on disposal (60,000 x \$0.82)	\$49.200
Less: Cost base of Zenyth Shares (60,000 x \$1.00) - \$2,400	(S57.600)
Capital loss	(S8, 400)

In calculating a capital loss any indexation of the cost base is ignored.

5. Stamp Duty

Zenyth Shareholders will not be required to pay any stamp duty on the disposal of their Zenyth Shares under the Share Scheme or on the acquisition of the Avexa Shares as a result of the Special Distribution.

6. GST

GST will not apply to the transfer of the Zenyth Shares under the Share Scheme or the payment of the Special Distribution.

Our income tax advice is based on current taxation law as at the date our advice is provided. You will appreciate that the tax law is frequently being changed, both prospectively and retrospectively. A number of key tax reform measures have been implemented, a number of other key reforms have been deferred and the status of some key reforms remains anclear at this stage.

Unless special arrangements are made, this advice will not be updated to take account of subsequent changes to the tax legislation, case law, rulings and determinations issued by the Australian Commissioner of Taxation or other practices of taxation authorities. It is your responsibility to take farther advice, if you are to rely on our advice at a later date.

We are, of course, unable to give any guarantee that our interpretation will ultimately be sustained in the event of challenge by the Aastralian Commissioner of Taxation.

KPMG's tax practice is not licensed to provide financial product advice under the Corporations Act and taxation is only one of the matters that must be considered when making a decision on a financial product. You should consider taking advice from an Australian Financial Services Licence holder before making any decision on a financial product.

Yours faithfully

Carl Dilena Partner

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Section 7 - Procedural Aspects of the CSL Acquisition Proposal

7.1 Introduction

This Section 7:

· discusses the purpose and effect of the Share Scheme, Special Distribution and the Option Scheme;
· provides a summary of the conditions and approvals required for each of these three proposed transactions to proceed; and
· provides a summary of the rights of Zenyth and CSL to withdraw from the Share Scheme (in which case neither the Special Distribution nor the Option Scheme will proceed).

The conditions and approvals for the Share Scheme, Special Distribution and the Option Scheme, and the rights of Zenyth and CSL to withdraw from the Share Scheme, are set out in the Merger Implementation Deed, the full terms of which are reproduced in Section 15 of this Explanatory Booklet. These conditions, approvals and withdrawal rights are summarised in this Section 7.

7.2 Share Scheme

(a) Purpose

The purpose of the Share Scheme is to implement the terms of a proposed arrangement between Zenyth and Scherne Shareholders to deliver 100% ownership and control of Zeayth to CSL, in exchange for payment of the Share Scheme Consideration. by CSL, if the Share Scheme becomes Effective, Zenyth will become a wholly owned subsidiary of CSL and will be delisted. from ASX. The terms of the Share Scheme are set out in fall in Section 13 of this Explanatory Booklet.

(b) Legal Effect

If the Share Scheme becomes Effective, it will constitute a binding arrangement between Zenyth and each Scheme Shareholder under which:

· all Zenyth Shares held by each Scheme Shareholder (including those who do not vote on the Share Scheme and those who vote against it) will be transferred to CSL, without the need for any action on the part of the Scheme Shareholders; and
· each Scheme Shareholder (including those who do not vote on the Share Scheme and those who vote against it) will receive the Share Scherne Consideration as consideration. in full for the transfer of all of their Zenyth Shares to CSE.

(c) Classes of Members Affected by the Share Scheme

Zenyth has only one class of shares on issue - fully paid ordinary shares. There is only one class of ordinary shareholders who will be affected by the Share Scheme, namely Zenyth Shareholders. Accordingly, all Zenyth Shareholders will vote on the Share Scheme as a single class at the Share Scheme Meeting.

(d) Share Scheme Meeting

On 12 September 2006, the Coart ordered Zenyth to convene. a meeting of Zenyth Shareholders to consider and vote on the Share Scheme

The notice convening the Share Scheme Meeting is set out in Section 10 of this Explanatory Booklet. The order of the Court convening the Share Scherne Meeting is not and should not be treated as an endorsement of, or any other expression of opinion. by the Coart on, the Share Scheme.

(e) Eligibility to Vote at the Share Scheme Meeting

Each person who is registered on the Zenyth Share Register as a Zenyth Shareholder as at the Voting Entitlement Time (7.00pm (AEST) on 21 October 2006) is entitled to attend and vote at the Share Scheme Meeting, either in person, by proxy or attorney or, in the case of a corporate Zenyth Shareholder or proxy, by a representative.

Section 1.9 of this Explanatory Booklet provides a summary of how to vote at the Share Scheme Meeting. A green proxy form for the Share Scherne Meeting is enclosed with this Explanatory Booklet.

(f) Voting Majority Required

The resolution to approve the Share Scheme is subject to approval by the majorities required under section 411(4)(a)(ii) of the Corporations Act. The Share Scherne Resolution must be approved by:

· a majority in number (more than 50%) of Zenyth Shareholders present and voting at the Share Scheme Meeting (whether inperson, by proxy, attorney or, in the case of corporate Zenyth Shareholders or proxies, by corporate representative); and
· Zenyth Shareholders whose Zenyth Shares in aggregate account for at least 75% of the votes cast on the resolution.

(g) Your Warranties Under the Share Scheme

All of the Zenyth Shares to be transferred ander the Share Scheme are to be transferred free from all mortgages, charges, liens, encumbrances and interests of third parties of any kind. whether legal or otherwise. Scheme Shareholders are taken to have warranted to CSL that all their Zenyth Shares (including any rights attaching to those shares) which are transferred to CSL under the Share Scheme will, at the date of the transfer, be fully paid and free from all mortgages, charges, liens, encumbrancesand interests of third parties of any kind, whether legal or otherwise, and restrictions on transfer of any kind, and that they have full power and capacity to transfer their Zenyth Shares together with any rights attaching to such shares.

7.3 Special Distribution

(a) Legal Effect

If the Share Scheme is approved by the requisite majority of Zenyth Shareholders, Zenyth Shareholders will be asked to approve the Special Distribution. The Special Distribution, if approved, will result in Scheme Shareholders (other than Ineligible Scheme-Shareholders) receiving approximately one Avexa Share for every six Zenyth Shares they hold, with fractional entitlements of 0.5 or more rounded up to the nearest whole number of Avexa Shares. and fractional entitiements of less than 0.5 disreparded. The Share Scheme contains provisions allowing Zenyth to disregard any share splitting that is deliberately undertaken to take advantage. of the rounding up of fractional entitlements of 0.5 or more: see Section 8.4(f) of this Explanatory Booklet). Ineligible Scheme Shareholders will receive the net sale proceeds of the Avexa Shares to which they would otherwise have been entitled: see Section 8.4(g) of this Explanatory Booklet.

The Special Distribution will require Zenyth to reduce its issued share capital by an amount equal to the market value of all of the Avexa Shares held by Zenyth, Accordingly, the General Meeting has been convened to consider and, if thought fit, approve the Special Distribution Resolution, being an ordinary resolution to approve the equal reduction of Zenyth's issued share capital required to accomplish the Special Distribution. The notice conversing the General Meeting is set out in Section 11 of this Explanatory Booklet.

If approved, the Special Distribution will apply to all Zenyth Shareholders, including those who do not vote on the Special Distribution Resolution and those who vote against it.

The Special Distribution Resolution will not proceed unless the Share Scheme becomes Effective. However, the Share Scheme. is not dependent on the Special Distribution Resolution being approved and implemented. If the Share Scheme is approved and all other conditions are satisfied or waived (as applicable), the Share Scheme will proceed whether or not the Special Distribution is approved. Therefore, all Zenyth Shareholders who intend to vote in favour of the Share Scheme should also vote in favour of the Special Distribution Resolution. Voting in favour of the Share Scheme but not the Special Distribution Resolution will result in Zeriyth Shareholders foregoing the opportunity to receive additional value by the transfer to them of Avexa Shares on a pro rata basis. That value will instead pass to CSL.

(b) Eligibility to Vote at the General Meeting

Each person who is registered on the Zenyth Share Register as a Zeayth Shareholder as at the Voting Entitlement Time (7.00pm) (AEST) on 21 October 2006) is entitled to attend and vote at the General Meeting, either in person, by proxy or attorney or, in the case of a corporate Zenyth Shareholder or proxy, by a representative.

Section 1.9 of this Explanatory Booklet provides a summary of how to vote at the General Meeting. A vellow proxy form for the General Meeting is enclosed with this Explanatory Booklet.

(c) Voting Majority Required

The Special Distribution is proposed as an ordinary resolution requiring the approval of a majority of the votes cast on the Special Distribution Resolution by Zenyth Shareholders present and voting at the meeting, whether in person, by proxy or attomey or, in the case of a corporate Zenyth Shareholder or proxy, by a representative.

7.4 Option Scheme

(a) Purpose

If the Share Scherne is approved by the regaisite majority of Zenyth Shareholders, Zenyth Optionholders will be asked to approve the Option Scheme. The purpose of the Option Scheme. is to implement the terms of a proposed arrangement between Zenyth and Scheme Optionholders to cancel all of the Options onissue, in exchange for payment by Zenyth of the Option Scheme. Consideration. Approval and implementation of the Option-Scheme will easure that, once Zenyth becomes a wholly owned subsidiary of CSL under the Share Scheme, CSL's 100% ownership and control will not be subsequently diluted by the issue of Zexyth Shares on exercise of outstanding Options. The terms of the Option Scheme are set out in full in Section 14 of this Explanatory Booklet.

(b) Legal Effect

If the Option Scheme becomes Effective, it will constitute a binding arrangement between Zenyth and each Scheme Optionholder ander which:

· all Zenyth Options held by each Scheme Optionholder (including those who do not vote on the Option Scheme and those who vote against it) and all rights and entitlements attaching to those Options will be cancelled; and
· each Scheme Optionholder (including those who do not vote on the Option Scheme and those who vote against it) will receive the Option Scheme Consideration as consideration. in full for the cancellation of all of their Zenyth Options.

Section 7 - Procedural Aspects of the CSL Acquisition Proposal continued

The Share Scheme is not dependent on the Option Scheme becoming Effective. If the Share Scheme is approved and all other applicable conditions are satisfied or waived, the Share Scherne will proceed whether or not the Option Scherne becomes Effective. See Section 5.3(d) of this Explanatory Booklet for a statement of CSL's intentions if the Share Scheme becomes Effective but the Options Scheme does not.

(c) Option Scheme Meeting

On 12 September 2006, the Coart ordered Zenyth to convene a meeting of Zenyth Opticaholders to consider and vote on the Option Scheme. The notice convesing the Option Scheme. Meeting is set out in Section 12 of this Explanatory Booklet. The order of the Court convening the Option Scheme Meeting is not and should not be treated as an endorsement of, or any other expression of opision by the Court on, the Option Scheme.

Zenyth has different series of Options on issue, with each series having a different exercise price and a different explay date. However, the Option Scheme treats all Optionholders as a single class, on the basis that the methodology used to arrive at the proposed Option Scheme Consideration achieves consistent relativities of value that take appropriate account of the different exercise prices and different expiry dates.

(d) Eligibility to Vote at the Option Scheme Meeting

Each person who is registered on the Zenyth Optico Register as a Zenyth Optionholder as at the Voting Entitlement Time (7.00pm (AEST) on 21 October 2006) is entitled to attend and vote at the Option Scheme Meeting, either in person, by proxy or attorney.

Section 1.9 of this Explanatory Booklet provides a summary of how to vote at the Option Scheme Meeting. A blue proxy form for the Option Scheme Meeting is eaclosed with this Explanatory Booklet if you are a Zenyth Optionholder.

(e) Voting Majority Required

The resolution to approve the Option Scheme is subject to approval by the majorities required under section 413(4)(a)(i) of the Corporations Act. The Option Scheme Resolution must be approved by:

· a majority in number (more than 50%) of Zenyth Optionholders present and voting at the Option Scheme Meeting (whether in person, by proxy or attorney); and
· Zenyth Optionholders whose Options represent at least 75% of the total amount of debts and claims of the Optionholders present and voting at the Option Scheme. Meeting (whether in person, by proxy or attorney). For this

purpose, the 'amount' (or value) of each Optionholder's 'debt and claim' will be the same as the amount of the Option. Scheme Consideration payable for the cancellation of that Optionholder's Options under the Option Scheme (expressed in cents).

The Option Scheme is also conditional on the approval of the Share Scheme. The Option Scheme will not take effect unless the Share Scheme takes effect.

(f) July 2006 Management Options

On 6 July 2006, the Zenyth Board resolved to issue 1,000,000 Zenyth Options exercisable at \$0.62 per Option to certain senior executives of Zenvth (July 2006 Management Options). The Joly 2006 Management Options were issued as part of the relevant senior executives' annual performance reviews for the financial vear ended 30 June 2006 and consistent with Zenyth's practice in previous financial years. The decision to issue the July 2006 Management Options was taken by the Board in consideration. of all relevant circumstances, including the performance of the senior executives in achieving objectives and targets set by the Company for the financial year ended 30 June 2006, the desirability of providing incentives to the senior executives for their ongoing. performance and loyalty and the then incomplete negotiations with CSL surrounding the CSL Acquisition Proposal.

Each sesior executive to whom July 2006 Management Options were issued has undertaken to Zenyth to enter into an agreement with the Company ander which they will each exercise those Options in accordance with their terms so that they are issued with Zenyth Shares on such exercise prior to the Share Scheme Record Date. At the date of preparation of this Explanatory Booklet, Zenyth expects that these agreements will have been entered into by the Company and each relevant senior executive prior to the dispatch of this Explanatory Booklet. The Zenyth Shares issued to the senior executives on exercise of their July. 2006 Management Options will be eligible to participate in the Share Scheme on the same terms as the holders of other Zenyth Shares.

7.5 Share Scheme - Conditions and Termination (a) Conditions

Implementation of the Share Scheme is subject to the satisfaction. or waiver of the following remaining conditions.

(Satisfaction or waiver of conditions in Merger Implementation 伯。 Deed) As at 8.00am on the Second Court Hearing Date, all of the conditions precedent in clause 3.1(a) to clause 3.1(i). inclusive of the Merger Implementation Deed must be satisfied or waived in accordance with that deed or must have ceased to have effect in accordance with that deed. The Merger

Implementation Deed is reproduced in Section 15 of this Explanatory Booklet. The conditions in clause 3.1(a) to clause 3.1(i) of the Merger Implementation Deed include the following:

· Zenyth Shareholders approving the Share Scheme at the Share Scheme Meeting;
the Court approving the Share Scheme;
· no prohibitions, including restraining orders or injunctions, being issued by any Court of competent jurisdiction or the Takeovers Panel:
· no Material Corporate Transaction. Material Adverse Change or Prescribed Occurrence (in each case as specifically defined in the Merger Implementation Deed) arising in respect of Zenyth; and
· that standard representations and warranties given by both parties are (and remain) true and correct.
(ii) (No termination of Merger Implementation Deed) As at 8.00am on the Second Court Hearing Date, the Merger Implementation Deed must not have been terminated. The circumstances in which the Merger Implementation Deed may be terminated are summarised below and are set out in full in Section 15.

(b) Termination of Merger Implementation Deed

The Merger Implementation Deed may be terminated at any time prior to 8.00am on the Second Coart Hearing Date:

by either Zenyth or CSE where the Effective Date of the Share Scheme does not occur on or before 17 November 2006 or such later date as CSL and Zenyth agree in writing;
by either Zenyth or CSE if the other party is in material breach of its obligations under the Merger Implementation Deed, which is not remedied within 10 Business Days (or any shorter period ending at 5,00pm (AEST) on the day before the Second Court Hearing Date) of the breaching party receiving notice specifying that breach and requiring it to be rectified;
by either Zenyth or CSL where the resolution submitted to the Share Scheme Meeting (or any adjoarnment or postponement thereof) is not approved by the majorities required ander the Corporations Act;
by either Zenyth or CSE where any court, the Takeovers Panel or any regalatory authority has issued an order or ruang or otherwise taken action to permanently restrain or prohibit the Share Scheme, or has permanently refused to do anything necessary to permit it;
by either Zenyth or CSL if a condition precedent in the Merger implementation Deed that is expressed to be a party's benefit has failed to be satisfied, has become incapable of being satisfied or is not reasonably capable of being satisfied and has not been waived:
by CSL where, prior to the Second Court Hearing Date, any Zenyth Director withdraws his recommendation of the Share Scheme or the Special Distribution or makes a public statement. that he no longer supports the Share Scheme or the Special Distribution; and
by Zeayth where, prior to the Second Court Hearing Date, a bona fide third party proposal to acquire a relevant interest in all or a substantial part of the Zenyth Shares, or any interest in all or a substantial part of the business or assets of Zenyth or the Zenyth Group is publicly announced or Zenyth receives an offer from a counterparty to one of Zenyth's key collaboration. projects which the Zenyth Board, acting in good faith:
determines is reasonably capable of being valued and completed and is more favourable to Zenvth Shareholders than the Share Scheme: and
publicly recommends that third party proposal as being in the interests of Zenyth and its members.

7.6 Special Distribution - Conditions

The key conditions that must be satisfied in order for the Special Distribution to proceed are:

· the Share Scherne becoming Effective; and
· Zenyth Shareholders approving the Special Distribution at the General Scheme Meeting.

7.7 Option Scheme - Conditions

The key conditions that must be satisfied in order for the Option Scheme to proceed are:

- the Share Scheme becoming Effective;
Zenyth Optionholders approving the Option Scheme at the Option Scheme Meeting; and
the Court approving the Option Scheme.

7.8 Status of Conditions and Termination Rights

As at the date of this Explanatory Booklet, Zenyth is not aware of any circumstances which would cause any of the above conditions. sot to be satisfied or which could result in termination of the Merger Implementation Deed. Zenyth will make a statement. regarding the status of the conditions to the Merger implementation. Deed at the commencement of the Share Scheme Meeting.

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Section 8 - Implementation Procedures

8.1 Introduction

$\mathbf{R}$

the Share Scheme is approved by Zenyth Shareholders at the Share Scherne Meetiag;
all other conditions to the Share Scheme as described in Section 7.5 (other than Coart approval of the Share Scheme). have been satisfied or waived (as applicable);
the Special Distribution is approved by Zenyth Shareholders. at the General Meeting; and
the Optica Scherne is approved by Zenyth Optionholders at the Option Scheme Meeting,

the further general steps required to implement these three transactions are as described in this Section 8.

The description of these general steps is based on the obligations of Zenyth and CSL under the Merger Implementation Deed. CSL has also executed a Deed Poll in which it acknowledges and confirms, for the benefit of Scheme Shareholders, its obligation to pay them the Share Scheme Consideration. The full terms of the Merger Implementation Deed and the Deed Poll are contained in Section 15 of this Explanatory Booklet.

8.2 Court Approval of Schemes

Zenyth will apply to the Court for orders approving the Share Scheme and the Option Scheme. It is expected that the Court hearing to approve the Schemes will be held on or about 31 October 2006. The Court has a wide, overriding discretion whether or not to approve the Schemes under section 411(4)(b) of the Corporations Act.

The Corporations Act and the Supreme Court (Corporations) Rules 2003 provide a procedure for Zenyth Shareholders and Optionholders to oppose the approval by the Court of the Share Scheme and the Option Scheme respectively. If you wish to oppose the approval of either of the Schemes at the Second Court Hearing, you may do so by filing with the Court and serving on Zeayth an interlocutory process in the prescribed form together with any affidavition which you wish to rely at the hearing. With leave of the Court, you may also oppose the approval of either of the Schemes by appearing at the Second Court Hearing and applying to raise any objections you may have at the hearing. Zenyth should be notified in advance of an intention to object. The date for the Second Coart Hearing is currently scheduled to be 31 October 2006, though an earlier date may be sought. Any change to this date will be announced through ASX.

8.3 Receipt of Court Orders

If the Coart makes orders approving the Share Scheme and the Option Scherne, Zenyth will lodge a copy of those orders with ASIC under section 411(10) of the Corporations Act. As soon as the copies of the Coart orders approving the Schemes are lodged with ASIC, each Scheme becomes legally Effective. This is expected to occur on or about 31 October 2006.

If the Share Scheme becomes legally Effective, Zenyth and CSL. will become bound to implement the Share Scheme in accordance with the terms of that Scheme and the Deed Poll. If the Option Scheme becomes legally Effective, Zenyth will become boand to implement that Scheme in accordance with its terms.

Only Zenyth Shareholders who qualify as Scheme Shareholders will be bound by and have the benefit of the Share Scheme. Only Zenyth Optionholders who qualify as Scheme Optionholders will be bound by and have the benefit of the Option Scheme. Section 8.6 of this Explanatory Booklet describes the principles in the Share Scheme and Option Scheme for determining the identity of Scheme Shareholders and Scheme Optionholders respectively.

If either Scheme does not become Effective by 17 November 2006 or such later date as agreed in writing by Zenyth and CSL, the relevant Scheme will lapse.

8.4 Implementation

(a) Suspension of Trading of Zenyth Shares

if the Coart approves the Share Scheme, Zenyth will notify ASX. of that approval on the day it is received (expected to be Teesday, 31 October 2006). It is expected that suspension of trading in Zenyth Shares on ASX will occur from the close of trading on that day.

(b) Capital Reduction

On the implementation Date, Zenyth will reduce its issued share capital by an amount equal to the market value of all the Avexa. Shares registered in its name as at the Share Scheme Record Date. This market value will be calculated by reference to the volume weighted average price of Avexa Shares on ASX on the five trading days prior to the implementation Date, excluding special crossings, overnight sales and exchange traded option exercises.

Zenyth will effect the capital reduction by distributing in specie. to Scherne Shareholders all the Avexa Shares registered in the Company's name as at the Share Scheme Record Date, in proportion to the namber of Scheme Shares held by each Scheme Shareholder, with:

the entitlements of each Scheme Shareholder who is not an ineligible Scheme Shareholder being satisfied in the manner set out in Section 8.4(e) below;
· fractional entitlements being treated as set out in Section 8.40) below: and
· the entitlements of each ineligible Scheme Shareholder being satisfied in the manner set out in Section 8.4(g) below.

(c) Transfer and Registration of Scheme Shares

On the Implementation Date, the Scheme Shares held by Scherne Shareholders, together with all rights and entitlements attaching to those shares as at the Implementation Date, will be transferred to CSL without the need for any further act by any Scheme Shareholder, by Zeayth effecting on behalf of Scheme Shareholders a valid transfer or transfers of the Scheme Shares to CSL (this may be a master share transfer).

is consideration of the transfer of the Scheme Shares to CSL. CSL will provide the Share Scheme Consideration to each Scheme Shareholder, in accordance with the provisions of the Share Scheme.

In its capacity as the sole shareholder of Zenyth, CSL will cause the Zenyth Board and the boards of Zenyth's subsidiaries to be reconstituted with persons aominated by CSE. Mr Ian Davis and Dr Andrew Nash will remain as directors of entities within the Zenyth Group for a period following implementation to assist with transitional and integration matters.

(d) Payment of Share Scheme Consideration

CSE will pay the aggregate Share Scheme Consideration within five Business Days after the Implementation Date. This obligation will be satisfied by CSL dispatching a cheque in Australian carrency. draws on an Aastralian bask to each Scheme Shareholder by pre-paid post to their address, as it appears in the Zenyth Share Register. The amount of the cheque will be equal to the number of Scheme Shares held by each Scheme Shareholder multiplied by the Share Scheme Consideration. In the case of Scheme Shares held in joint names, cheques will be payable and forwarded. to the holders whose names appear in the Zenyth Share Register as at the Share Scherne Record Date.

(e) Distribution of Avexa Shares

Zenyth will transfer Avexa Shares to Scheme Shareholders (other than to Ineligible Scheme Shareholders, in respect of whom-Section 8.5(g) below applies) as follows:

· on the implementation Date, but prior to completion of the transfer of the Scheme Shares to CSL as contemplated in Section 8.5(c) above, Zenyth will transfer the applicable number of Ayexa Shares to each Scheme Shareholder; and · Zenver will procure the entry of the name of the Scheme Shareholder in the Avexa Share Register and the issue of a holding statement in respect of the applicable number. of Avexa Shares.

The Share Scheme provides that:

· each Scherne Shareholder to whom Avexa Shares are transferred under the Special Distribution agrees to become a member of Avexa for the purpose of section 231 of the Corporations Act, to have their name and address entered in the Avexa Share Register and to be bound by the constitution. of Avexa as in force from time to time in respect of the Avexa. Shares.
· each Scheme Sharebolder, without the need for any further act, irrevocably appoints Zenyth and each of its directors and officers, jointly and severally, as that Scheme Shareholder's attorney and agent for the parpose of executing any form of application regaired for Avexa Shares to be transferred. to that Scheme Shareholder under the Special Distribution.
· the Avexa Shares to be transferred under the Special Distribution will be transferred with all rights and entitlements. attaching to the Avexa Shares at that time, free from all eacumbrances and interests of third parties of any kind, fully paid and will rank equally in all respects with all other Avexa-Shares then on issue.

(f) Fractional Entitlements

Fractional entitlements of 0.5 of an Avexa Share or greater that arise from the calculation of a Scheme Shareholder's Special Distribution entitlement will be rounded up to the nearest whole number of Avexa Shares. Fractional entitlements of less than 0.5 of an Avexa Share will be disregarded. If Zenyth is of the opinion that any Zenyth Shareholders have, before the Share Scheme. Record Date, been party to shareholding spiltting or division in an attempt to obtain an advantage from this rounding up policy, Zenyth may disregard the relevant transfers in determining the Special Distribution entitlements of the relevant Zenyth Shareholders: see further clause 5.4(a) of the Share Scheme. which is contained in Section 13 of this Explanatory Booklet.

(g) Ineligible Scheme Shareholders

An Ineligible Scheme Shareholder is a Scheme Shareholder:

whose registered address as it appears in the Zenyth Share-Redister is in any jurisdiction other than Australia and its external territories or New Zealand: or
· whose entitlement under the Special Distribution would cause that Scheme Shareholder to receive a transfer of Avexa Shares. that would result in the Scheme Shareholder holding less than a 'marketable parcel' of Avexa Shares, as defined in the Listing Rules

Section 8 - Implementation Procedures continued

Ineligible Scheme Shareholders will not receive a transfer of Avexa Shares, instead, the Avexa Shares to which Ineligible Scheme Shareholders would otherwise be entitled under the Special Distribution will be transferred to the Nominee. The Nominee will:

· sell on ASX or place for the benefit of each Ineligible Scheme Shareholder all of the Avexa Shares transferred to the Nominee:
· account to each Ineligible Scheme Shareholder for the net proceeds of the sale (on an averaged basis so that all Ineligible Scheme Shareholders receive the same price per Avexa Share subject to rounding down to the nearest whole cent), after deduction pro rata of any applicable brokerage, taxes and charges; and
· remit those net proceeds by pre-paid post to each Ineligible Scheme Shareholder's address as shown in the Zenyth Share Register by cheque in Australian currency drawn on an Australian bank.

If Zenyth is of the opinion that any Zenyth Shareholders have, before the Share Scheme Record Date, been party to shareholding splitting or division in an attempt to qualify as a Holder of a Non-Marketable Parcel (and therefore an ineligible Scheme Shareholder), Zenyth may disregard the relevant transfers in determining whether any Zenyth Shareholder is an Ineligible. Scheme Shareholder: see further clause 5.4(b) of the Share Scheme which is contained in Section 13 of this Explanatory Booklet.

(h) Cancellation of Scheme Options

On the implementation Date, the Scheme Options held by Scheme Optionholders, together with all rights and entitlements. attaching to those options as at the Implementation Date, will be cancelled without the need for any further act by any Scheme Optiosholder, in consideration of the cancellation of the Scherne-Options, Zenyth will provide the Option Scheme Consideration to each Scheme Optionfaolder, in accordance with the provisions of the Option Scheme.

(i) Payment of Option Scheme Consideration

The Option Scheme Consideration in respect of each Scheme Option will be paid by Zenyth via a cheque in Australian currency drawn on an Australian bank seat by pre-paid post to the Scheme Optionholder's address as it appears in the Zeeyth Option Register within five Business Days after the Implementation Date.

(i) Delisting of Zenyth

At a time determined by CSL following the implementation of the Share Scheme, CSL will cause Zenyth to apply for the termination of the official quotation of Zenyth Shares on ASX and to have itself removed from the official list of ASX. It is currently expected that this will occur on the first Business Day after the Implementation Date.

8.5 Determination of Scheme Shareholders

To establish the identity of the Scherne Shareholders, dealings in Zeayth Shares will only be recognised if:

· in the case of dealings of the type to be effected using CHESS, the transferee is registered in the Zenyth Share Register as the holder of the relevant Zenyth Shares on or before the Share Scheme Record Date: and
· in all other cases, registrable transmission applications or transfers in respect of those dealings are received on or before the Share Scheme Record Date at the place where the Zenyth Share Register is kept.

Zenyth must register any non-CHESS registrable transmission. applications or transfers of Zenyth Shares by, or as soon as practicable after, the Share Scheme Record Date.

Zenyth will not accept for registration or recognise for any purpose any transmission application or transfer in respect of Zenyth Shares received after the Share Scheme Record Date, other than a transfer to CSL in accordance with the Share Scheme.

For the purpose of determining entitlements to the Share Scheme. Consideration and the Special Distribution, Zenyth must maintain (or procere the maintenance of) the Zenyth Share Register in the manner set out above. The Zenyth Share Register in this form will solety determine entitiements to the Share Scheme Consideration and the Special Distribution.

From the Share Scheme Record Date, all holding statements for Zenyth Shares will cease to have effect as documents of title, and each entry on the Zenyth Share Register at the Share Scheme Record Date will cease to have any effect other than as evidence. of the entitlements of Scherne Shareholders to their Share Scheme Consideration and Special Distribution entitlement.

On or before 9.00am on the implementation Date, Zenyth will give to CSE details of the names and addresses shown in the Zenyth Share Register of all Scheme Shareholders and of the namber of Scheme Shares held by each of them on the Share Scheme Record Date.

8.6 Determination of Scheme Optionholders. Restrictions on Option Exercise

Zenyth will not accept as valid nor recognise for any purpose any notice of exercise of Zenyth Options received:

by the Option Scheme Record Date other than in accordance with the terms and conditions of the Zenyth Option Plan under which the Zenyth Option were granted; or
(if the Option Scheme becomes Effective) after the Option Scheme Record Date.

For the purpose of determining entitlements to the Option. Scherne Consideration, Zenyth must maintain the Zenyth Option. Register in the manner set out above. The Zenyth Option Register in this form will solely determine entitlements to the Option Scheme Consideration.

8.7 CHESS and Holding Statements for Avexa Shares

Shortly following the transfer of Avexa Shares to Scheme Shareholders (other than Ineligible Scheme Shareholders), those Scheme Shareholders will receive an initial statement of holding (similar to a bank account statement) that sets out the number of Avexa Shares which have been transferred to them under the Special Distribution. This statement will also provide details of a shareholder's HIN in the case of a holding on the CHESS subregister or SRN in the case of holding on the issuer-sponsored subregister. Scheme Shareholders receiving Avexa Shares under the Special Distribution will be required to quote their HIN or SRN, as applicable, in all dealings with a stockbroker or the Avexa share registry.

Scheme Shareholders receiving Avexa Shares ander the Special Distribution will receive subsequent statements at the end of any month in which there has been a change to their holding on the Avexa Share Register and as otherwise regaired under the Listing Rules.

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Section 9 - Additional Information

9.1 Introduction

This Section 9 sets out the statutory information required by section 412(3)(a) of the Corporations Act and Parts 2 and 3 of Schedale 8 to the Corporations Regalations to be included in the Explanatory Bookiet, but only to the extent that this information. is not otherwise disclosed in other Sections. This Section also includes additional information that your Directors consider material to a decision on how to vote on the resolutions to be considered at the Share Scheme Meeting, General Meeting and the Option Scheme Meeting.

In this Section, the terms 'associate', 'executive officer', imarketable securities', irelated body corporate' and 'subsidiary' have the meanings given to them in the Corporations Act.

9.2 Capital Structure and Shareholders

As at 4 September 2006, Zenyth had 125.176,327 Shares on issue, held by approximately 5,240 Shareholders. Zenyth's shareholder distribution as at 4 September 2006 is as follows:

Number of Shares Held	Number of Shareholders
1000 1.	Q26
1.001 - 5.000	2.499
5.001 - 10.000	507
10.001 - 100.000	420
100.001 +	-47
Total	4.393

The 20 largest shareholders of Zenyth as at 4 September 2006 are as follows:

Rank	Name	Units	% of Issued Capital
1.	FIBRE OPTICS (AUST) PTY LTD LEVEL 1, 10 WALLACE AVENUE TOORAK VIC	28,264.583	22.58
2.	STATE TRUSTEES UMITED CA. THE SECRETARY DEPARTMENT OF TREASURY AND FINANCE 4TH FLOOR 1 TREASURY PLACE MELBOURNE VIC	19.743.593	35.77
3.	INVIA CUSTODIAN PTY LIMITED C/- M3788239C IPM GPO BOX 4595 SS MELBOURNE VIC	36.749.344	33.38
4	QUEENSLAND INVESTMENT CORPORATION C/- NATIONAL NOMINEES LIMITED GPO BOX 2242 BRISBANE OLD	8,073,262	6.45
5.	CITICORP NOMINEES PTY LIMITED GPO BOX 764G MELBOURNE VIC	7,372,853	5.89
6.	RIJ CUSTODIANS PTY LTD LEVEL 39, 55 COLLINS STREET MELBOURNE VIC	5.344.514	4.27
7.	MERCK SHARP & DOHME (AUSTRALIA) PTY LIMITED ATT: MR JOHN O'CONNOR 54-68 FERNDELL STREET SOUTH GRANVILLE NSW	3,636.364	2.90
8.	UBS NOMINEES PTY LTD LEVEL 25, 1 FARRER PLACE GOVERNOR PHILLIP TOWER SYDNEY NSW	3.090.629	2.47
G.	WESTPAC CUSTODIAN NOMINEES LIMITED 275 KENT STREET SYDNEY NSW	2,209.731	3.77
10	THE WALTER AND ELIZA HALL INSTITUTE OF MEDICAL RESEARCH 1G ROYAL PARADE PARKVILLE VIC	1,000,000	0.80
13 ^°	ANZ NOMINEES LIMITED GPO BOX 2842AA MELBOURNE VIC	748.800	0.60
12	HOWARD FLOREY INSTITUTE OF EXPERIMENTAL PHYSIOLOGY AND MEDICINE THE UNIVERSITY OF MELBOURNE PARKVILLE VIC	633.334	0.51
13	J P MORGAN NOMINEES AUSTRALIA LIMTED LOCKED BAG 7 ROYAL EXCHANGE NSW	586.221	0.47
14	THE HEART RESEARCH INSTITUTE LTD 145-147 MISSENDEN ROAD CAMPERDOWN NSW	416.668	0.33
15	IMMUNOGENETICS RESEARCH FOUNDATION INCORPORATED PO BOX 5100 CANNING VALE WA	333.334	0.27

			% of Issued
Rank	Name	Units	Capital
16	THE MENZIES SCHOOL OF HEALTH RESEARCH PO BOX 41096 CASUARINA NT	333.334	0.27
17	ARATE PTY LTD 69 CANTERBURY ROAD MIDDLE PARK VIC	288.250	0.23
18.	- FORTIS CLEARING NOMINEES P/E
	SUITE 1101 LEVEL 11 5 ELIZABETH STREET SYDNEY NSW	274.961	$0.22 -$
19.	TOLEEC HOLDINGS PTY ETD 47 CEOTILDE STREET MT EAWLEY WA	254.740	0.20
20.	- MR-GRAEME LESLIE SHALDERS 4 DANSON STREET HIGHEIT VIC	230.000	0.18
Total		99.584.515	79.56

9.3 Directors

The Board consists of the following four Directors:

Director's Name	Position
Mr (an R Davis	Chairman.
Dr Andrew Nash	Chief Executive Officer/Executive Director
Professor Silviu Itesca	Non-executive Director
Mr James A C MacKenzie	Non-executive Director

9.4 Marketable Securities of Zenyth Held by or on Behalf of Directors

As at 4 September 2006, the marketable securities that Zenyth has on issue are 125,176,327 Shares and 6,249,650 Options. As at 4 September 2006, the number of Zenyth Shares and Zenyth Options held by or on behalf of each of the Directors is as follows:

	Number of Zenyth Shares held	Number of Zenyth Options
Director's Name	by or on Behalf of the Director	Held by or on Behalf of the Director
Mr (an R Davis	200.000	-N8
Dr Andrew Nash	14.669.	1.000.000
Professor Silviu Itesca	34.253	Nä
Mr. James A C MacKenzie	50.000.	칠
Total	298.922	1.000.000

9.5 Relevant Interests in Marketable Securities of CSL

No Director nor any of his associates has any relevant interest in any marketable security issued by CSL or any related body corporate of CSL.

9.6 Directors' Interests in any Contracts With CSL

No Director nor any of his associates has entered into, or otherwise has any interest in, any contract with CSL or any of its associates.

If the Share Scherne becomes Effective, Zenyth's Chairman, Mr fan Davis, and Chief Executive Officer, Dr Andrew Nash, have agreed with CSL to remain on the Board of Zenyth and its subsidiaries for a short period after the Implementation Date to assist with transitional and integration issues.

9.7 Directors' Interests in Agreements Connected with or Conditional on the CSL Acquisition Proposal

No Director has an interest in any agreement connected with or conditional on the CSL Acquisition Proposal, other than as set ast below.

As noted in Section 9.4, Dr Andrew Nash is the holder of 1,000,000 Zenyth Options. If the Option Scheme becomes Effective, Dr Andrew Nash will be paid \$315,589 as Option. Scheme Consideration. One of the conditions to which the

Section 9 - Additional Information continued

Option Scheme is subject is that the Share Scheme becomes. Effective. The Share Scheme is the legal mechanism by which CSL will acquire 100% ownership and control of Zenyth. Accordingly, the receipt by Dr Andrew Nash of his Option. Scheme Coasideration is connected with and conditional on the Share Scheme proceeding. If Dr Nash exercises his Zenyth Options prior to the Voting Entitlement Time, he will be required to pay the exercise price for those Options. The Zenyth Shares issued to Dr Nash on exercise of any of his Zenyth Options will be eligible to participate in the Share Scheme and the Special Distribution on the same basis as all other Zenyth Shareholders.

In August 2006, the Zenyth Board agreed to pay Dr Nash, in addition to his remuneration ander his employment contract, a special business continuity performance bonus of \$37,080. to retain his services following Zenyth's entry into the Merger Implementation Deed. This bonds is conditional on, among other matters, a change in control occurring in respect of Zenyth parsuant to a corporate control proposal. The bonus is payable within 30 days of the date that control passes to the proponent of the relevant proposal. This means, for example, that if control of Zenyth passes to CSL pursuant to the Share Scheme becoming Effective, the special basiness continaity performance bonus. becomes due to Dr Nash.

If the Share Scheme becomes Effective, Dr Nash will also be paid a cash bonus of up to \$120,000, in lieu of the grant of Zenyth. Options that would otherwise have been issued to him as part. of his Total Remuneration Package, in the absence of the CSL Acquisition Proposal.

Messrs Davis and MacKenzie and Professor Itescu will each be paid \$35,000 for providing services to a sub-committee constituted by the Board to consider and respond to the CSL Acquisition Proposal.

Mr MacKeszie is a non-executive director of Circadian Technologies Limited, a wholly owned subsidiary of which is one of Zenyth's largest shareholders.

Mr Ian Davis is a partner of Minter Ellison, lawyers. Minter Ellison has acted as legal adviser to Zenyth in relation to the CSL Acquisition Proposal and will be paid legal fees for its services.

9.8 Retirement Benefits

No payment or other benefit is proposed to be made or given in connection with the CSL Acquisition Proposal to any Director, secretary or executive officer of Zenyth, or of any related body corporate of Zenyth, as compensation for loss of, or as consideration for, or in connection with, his or her retirement.

from office in Zenyth or in a related body corporate, other than as follows. If the Share Scheme becomes Effective, Professor itesculand Mr MacKenzie will each be paid \$28.885 and \$29.975 respectively as compensation for loss of office from Zenyth. These amounts represent six months of the fees payable to Professor itesca and Mr MacKenzie for their services as Directors.

9.9 Material Changes in the Financial Position of Zenyth

So far as is known to any Director, except as disclosed in this Explanatory Booklet or as otherwise disclosed to ASX. by Zenyth, the financial position of Zenyth has not materially changed since the date of its financial report for the half year ended 31 December 2005, as lodged with ASX on 23 February 2006. Zenyth Shareholders wishing to consider the Company's financial performance for the half year ended 31 December 2005. should review the half yearly financial reports and accounts lodged with ASX on 23 February 2006.

Other than the CSL Acquisition Proposal, there are no significant changes to the nature of Zenyth's activities as at the date of this Explanatory Booklet.

9.10 Directors' Intentions Regarding the Business, Assets and Employees of Zenyth

if the Share Scheme is approved and implemented, the existing Zenyth Board will be reconstituted in accordance. with the instructions of CSL as the only shareholder of Zenyth, noting that Mr Ian Davis and Dr Andrew Nash will remain on the Board of Zenyth and its subsidiaries for a short period after the Implementation Date. Accordingly, it is not possible for the outgoing Directors to provide a statement of their intentions. regarding:

. the contineation of the business of Zenyth or how Zenyth's existing business will be conducted after the CSL Acquisition. Proposal is implemented:
· any major changes to be made to the business of Zenyth, including any redeployment of the fixed assets of Zenyth; or
. the fature employment of the present employees of Zenyth.

if the CSL Acquisition Proposal is approved and implemented, CSL will have 100% ownership and coatrol of Zenyth, and your Directors have been advised that the intentions of CSL are as set out in Section 5.3 of this Explanatory Booklet. The intentions of Mr Ian Davis and Dr Andrew Nash, as continuing Directors for a short period after the Implementation Date, will be to assist. CSL with transitional and integration issues.

9.11 Recent Zenyth Share Price Trading

Please refer to section 4.7 of the Independent Expert's Report for information regarding the quarterly prices and volumes at which Zenyth Shares traded on ASX in the two years prior to annoancement of the CSL Acquisition Proposal.

9.12 Formula for Calculating Entitlements to Avexa Shares Under the Special Distribution

The formula to be applied for calculating entitiements to the Avexa Shares to be transferred to Scheme Shareholders under the Special Distribution Resolution is one based on achieving a pro rata distribution to Scheme Shareholders (other than ineligible Scheme Shareholders) of all of the Avexa Shares registered in the name of Zenyth as at the Share Scherne Record Date. As at 4 September 2006:

- there are 125,176,327 Zenvth Shares on issue: and
· Zenyth is registered as the holder of 21,062,000 Avexa Shares.

Dividing 125,176,327 Zenyth Shares by 21,062,000 Avexa Shares delivers a ratio of approximately one Avexa Share for every six Zenyth Shares. Fractional entitlements of 0.5 of an Avexa Shares or greater will be rounded up to the nearest whole number. Fractional entitiements of less than 0.5 of an Avexa Shares will be disregarded. If Zenyth is of the opinion that any Zenyth Shareholders have, before the Share Scheme Record Date, been party to shareholding splitting or division in an attempt to obtain an advantage from this rounding up policy, Zenyth may disregard the relevant transfers in determining the Special Distribution entitlements of the relevant Zenyth Shareholders (see farther Section 8.4(f) of this Explanatory Booklet).

9.13 ASIC and ASX Waivers and Consents

(a) ASIC Waivers

Parsuant to Regalation 5.1.01(1) of the Corporations Regulations, ASIC has allowed Zenyth to omit from this Explanatory Booklet the list of Optionholders and other matters which would otherwise. be required by paragraphs 8201(a), 8201(b), 8201(c), 8201(d), 8201(e), 8203(a) and 8203(b) of Part 2 of Schedule 8 to the Corporations Regulations to be set out in this Explanatory Booklet.

(b) Listing Rule 6.23.2

Listing Rule 6.23.2 provides that the cancellation of unlisted options for consideration requires the approval of shareholders. ASX has granted Zenyth a waiver from Listing Rule 6.23.2 to propose the Option Scheme to Optionholders and, if the Option Scherne is approved by the Optionholders and the Court, implement the Option Scheme.

9.14 Right to Access Register of Optionholders and Zenyth Option Plan Documents

In accordance with the Corporations Act, Zenyth Optionholders may access and inspect the register of Optionholders maintained by the Company for no charge. Zenyth Optionholders may also request copies of the Zenyth Option Plan documentation. A small fee may be charged by the Company for copies of these documents. A copy of the Zenyth Option Plan documentation is also available on Zeayth's website at www.zenyth.com.aa-

9.15 No Unacceptable Circumstances

The Zenvth Board believes that the Share Scherne. Special Distribution and Option Scheme do not involve any circumstances in relation to the affairs of Zenyth that could reasonably be characterised as constituting unacceptable. circamstances for the parposes of section 657A of the Corporations Act.

9.16 Consents and Disclaimers

The following parties have given and have not, before the time of registration of this Explanatory Booklet by ASIC, withdrawn their written consent to be named in this Explanatory Booklet in the form and context in which they are named:

· Minter Ellison as legal adviser to Zenyth;
· KPMG as taxation adviser to Zenyth;
· Detoitte as the Independent Expert and to the inclusion of the independent Expert's Report set out in Section 15;
· CSL (in respect of the CSL information);
· Merrill Lynch Equities (Australia) Limited as the Nominee; and
· Compatershare as the Zenyth Share Registry.

Each of the above persons:

· does not make, or purport to make, any statement in this Explanatory Booklet or any statement on which a statement. in this Explanatory Booklet is based offier than, in the case of KPMG, CSL and Deloitte, a statement or report included. in this Explanatory Booklet with the consent of that party; and
· to the maximam extent permitted by law, expressly disclaims and takes no responsibility for any part of this Explanatory. Booklet, other than a reference to its name and, in the case of KPMG and Defoitte, any statement or report which has been included in this Explanatory Booklet with the consent of that party.

Section 9 - Additional Information continued

9.17 Other Material Information

Except as set out in this Explanatory Booklet, in the opision of the Zeavth Board, there is no other information material to the making of a decision in relation to the Share Scheme, Special Distribution and Option Scheme, being information that is within the knowledge of any Director or of any related body corporate. of Zenyth which has not been previously disclosed to Zenyth Shareholders.

Zenyth will issue a supplementary document to this Explanatory Booklet if it becomes aware of any of the following between the date of lodgement of this Explanatory Booklet for registration by ASIC and the Effective Date:

· a material statement in this Explanatory Booklet is false or misleading:
· a material omission from this Explanatory Booklet:
· a significant change affecting a matter included in this Explanatory Booklet; or
· a significant new matter has arisen and it would have been required to be included in this Explanatory Booklet if it had arisen before the date of lodgement of this Explanatory Booklet for registration by ASIC.

Depending on the nature and timing of the changed circumstances and subject to obtaining any relevant approvals, Zenyth may circulate and publish any supplementary document by:

· making an announcement to the ASX; and/or
· placing an advertisement in a prominently published newspaper which is circulated generally throughout Australia; and/or
· posting the supplemeatary document to Zenyth Shareaolders at their registered address as shown in the Zeayth Share Register,
as Zenyth in its absolute discretion considers appropriate.

9.18 Privacy

Zenyth may collect personal information in the process of implemeating the Schemes and the Special Distribution. Such information may include the name and contact details and security holding of Zenyth Secarity Holders, and the name of persons appointed by Zenyth Security Holders to act as proxy, corporate representative or attorney at any or all of the meetings. The primary purpose of collection of the personal information is to assist Zenyth in the coaduct of the meetings and to eaable the Schemes and the Special Distribution to be implemented by Zenyth in the manner described in this Explanatory Booklet. Without this information, Zenyth may be hindered in its ability to carry out these purposes to full effect. The collection of certain personal information is authorised by the Corporations Act.

Personal information may be disclosed to the Zenyth Share Registry, print and mail service providers, authorised securities brokers and to related bodies corporate of Zeayth and the parties. to the Merger Implementation Deed.

Zenyth Security Holders have certain rights to access personal information that has been collected. Zenyth Security Holders should contact Zenyth's Company Secretary in the first instance, if they wish to request access to their personal information.

Zenyth Security Holders who appoint a named person to act as their proxy, corporate representative or attorney at any or all of the meetings should ensure that they inform that person of the contents of this 9.18.

Section 10 - Notice of Share Scheme Meeting

Zenyth Therapeutics Limited ACN 006 614 375

Notice of Court Ordered Meeting of Zenyth Therapeutics Limited Shareholders

Notice is given that, by an Order of the Supreme Court of Victoria (Court) made on 12 September 2006 under section 411(1) of the Corporations Act 2001 (Cth) (Corporations Act), the Court has directed that a meeting of the holders of fally paid ordinary shares in Zenyth Therapeutics Limited (Zenyth) be held at the offices of Computershare, Yarra Falls, 452 Johnston Street, Abbotsford, Victoria on 23 October 2006 commencing at 2.00pm (AEST).

The Court has also directed that lan Davis, or failing him James MacKenzie, act as Chairman of the meeting

Purpose of the Meeting

The purpose of the meeting is to consider and, if thought fit, to agree (with or without any modification or conditions required by the Court to which Zenyth and CSL Limited agree) to a scheme of arrangement proposed to be made between Zenyth and the holders. of its ordinary shares (Share Scheme).

A copy of the Share Scheme and a copy of the Explanatory Statement required by section 412 of the Corporations Act in relation to the Share Scheme are contained in the Explanatory Booklet of which this notice forms part.

Resolution

The meeting will be asked to consider and, if thought fit, pass the following resolution:

That pursuant to and in accordance with the provisions of section 411 of the Corporations Act, the members are in favour of the arrangement proposed between Zenyth and the holders of its fully paid ordinary shares, designated the 'Share Scheme', as contained in and more particularly described in the Explanatory Booklet accompanying the notice convening this meeting (with or without any modifications or conditions required by the Court to which Zenyth and CSL Limited agree) and, subject to approval of the Share Scheme by the Court. the Board of Directors of Zenyth is authorised to implement the Share Scheme with any such modifications or conditions.

Dated: 21 September 2006

By Order of the Coart

Robyn M Fry Company Secretary

Explanatory Notes for the Share Scheme Meeting

General

· Capitalised words and phrases contained in this Notice of Meeting (including the proposed resolution) have the same meaning as set out in the Glossary in Section 17 of this Explanatory Booklet, of which this notice forms part.
. This notice should be read in conjunction with the entire Explanatory Sooklet of which this notice forms part. The Explanatory Booklet contains important information to assist. you in determining how to vote on the proposed resolution. The Explanatory Booklet includes a copy of the Share Scheme (refer Section 13) and a copy of the Explanatory Statement required by section 412 of the Corporations Act in relation to the Scherne of Amangement (the Explanatory Statement being all Sections of this Explanatory Booklet, other than Section 10, Section 11 and Section 12).

Voting Entitlements

. The Coart has ordered that, for the purposes of the Share Scheme Meeting, each person registered in the Zenyth Share Register as the holder of Zenyth Shares at 7.00pm (AEST). on 23 October 2006 is entitled to attend and vote at the Share-Scheme Meeting, either in person, by proxy or attorney or, in the case of a corporate Zenyth Shareholder, by a personal representative.

Required Voting Majority

. The resolution to approve the Share Scheme is subject to approval by the majorities required under section 411(4)(a)(ii) of the Corporations Act. The resolution to approve the Share Scheme must be approved by:
a majority in number (more than 50%) of Zenyth Shareholders. present and voting at the Share Scheme Meeting (whether inperson, by proxy, attorney or, is the case of corporate Zenyth. Shareholders, by corporate representative); and
Zenyth Shareholders whose Zenyth Shares in aggregate account for at least 75% of the votes cast on the resolution.
· The vote will be conducted by poll.

Court Approval

• In accordance with section 413(4)(b) of the Corporations Act, the Share Scheme (with or without any modification required by the Court to which Zenyth and CSE Limited agree) must also be approved by an order of the Court. If all conditions to the Share Scheme are satisfied or waived (as applicable), Zenyth intends to apply to the Court for orders to give effect to the Share Scheme.

How to Vote

Zenyth Shareholders enatled to vote at the Share Scheme Meeting may vote:

by attending the meeting and voting in person; or
by appointing an attorney to attend the meeting and vote on their behalf or, in the case of corporate shareholders or proxies, a corporate representative to attend the meeting and vote on its behalf: or
by appointing a proxy to attend and vote on their behalf, using the green proxy form accompanying this Notice. A proxy may be an individual or a body corporate.

Voting in Person (or by Attorney)

· Zenyth Shareholders or their proxies, attorneys or representatives (including representatives of corporate proxies) wishing to vote in person should attend the Share Scheme Meeting and bring a form of personal identification (such as your driver's licence).
To vote by attorney at this meeting, the original or a certified copy of the power of attorney or other authority (if any) under which the instrument is signed must be received by the Zenyth Share Registry before 5.00pm (AEST) on 21 October 2006 in any of the following ways:

By post in the reply paid envelope provided to the Zenyth Share Registry: Compatershare Investor Services Pty Limited GPO Box 242 Melbourne Victoria Australia 3001

By hand delivery to the Zenyth Share Registry at: Compatershare Investor Services Pty Limited Yarra Falls, 452 Johnston Street. Abbotsford Victoria Australia 3067

By fax to the Zeayth Share Registry on +61 3 9473 2555

· To vote in person, you or your proxy, attorney, representative or corporate proxy representative must attend the Share Scheme. Meeting to be held at the offices of Computershare, Yarra Falls, 452 Johnston Street, Abbotsford, Victoria on 23 October 2006. commencing at 2.00pm (AEST).
A vote cast in accordance with the appointment of a proxy or power of attorney is valid even if before the vote was cast the appointer:
died;
became mentally incapacitated;
revoked the proxy or power; or
transferred the Zenyth Shares in respect of which the vote MARY PRIM

unless Zenyth received written notification of the death, mental incapacity, revocation or transfer before the meeting or adjourned meeting.

Section 10 - Notice of Share Scheme Meeting continued

Voting by Proxy

· Zenyth Shareholders wishing to vote by proxy at this meeting must:
complete and sign or validly authenticate the green proxy. form, which is enclosed with this Explanatory Booklet; and
deliver the signed and completed proxy form to Zenyth by 5.00pm (AEST) on 21 October 2006 in accordance with the instructions below.
A person appointed as a proxy may be an individual or a body comorate
An electronic authentication of an appointment of proxy must include a method of identifying the appointing Zenyth Shareholder and an indication of their approval of the information communicated.

Submitting Proxy Votes

· Zenyth Shareholders wishing to submit proxy votes for the Share Scheme Meeting must return the enclosed green proxy form to Zenyth in any of the following ways:

By post in the reply paid envelope provided to the Zenyth Share Registry:

Computershare Investor Services Pty Limited GPO Box 242 Melhourne Victoria Australia 3003

By hand delivery to the Zenyth Share Registry at:

Computershare Investor Services Pty Limited Yarra Fa@s, 452 Johnston Street Abbotsford Victoria Australia 3067

By fax to the Zenvth Share Recistry on +61 3 9473 2555.

Note: proxies may not be returned by email, nor is internet based voting possible.

Notes for Proxy Appointments

A Zenyth Shareholder entitled to attend and vote at the meeting is entitled to appoint not more than two proxies to attend and vote at the meeting on that Zenyth Shareholder's behalf.
A proxy need not be a Zenyth Shareholder.
A proxy may be an individual or a body corporate. A proxy that is a body corporate may appoint a representative to exercise the powers that the body corporate may exercise as the Zenyth Shareholder's proxy.
. If a Zenyth Shareholder appoints two proxies and the appointment does not specify the proportion or number of the Zenyth Shareholder's votes each proxy may exercise, each proxy may exercise half the votes.
. A proxy may vote or abstain as he or she chooses except where the appointment of the proxy directs the way the proxy. is to vote on a particular resolution. If an appointment directs the way the proxy is to vote on a particular resolution:
if the proxy is the chair the proxy must vote on a poll and must vote in the way directed; and
if the proxy is not the chair the proxy need not vote on a poll, but if the proxy does so, the proxy mast vote in the way directed.
· If a proxy appointment is signed or validly authenticated by the Zenyth Shareholder but does not name the proxy or proxies in whose favour it is given, the chairman may either act as proxy or complete the proxy appointment by inserting the name or names of one of more Directors or the Company Secretary.
$\bullet$ $\parallel^p_{\mathbb{C}}$
a Zenyth Shareholder nominates the chairman of the meeting as the Zenyth Shareholder's proxy; or
the chairman is to act as proxy if a proxy appointment is signed by a Zenyth Shareholder but does not name the proxies in whose favour it is given or otherwise ander a default appointment according to the terms of the proxy form,

then the person acting as chairman in respect of an item of business at the meeting mast act as proxy under the appointment in respect of that item of business.

• Proxy appointments in favour of the chairman of the meeting, the secretary or any Director which do not contain a direction. will be voted in support of the Share Scheme resolution (in the absence of a more favourable proposal from another party prior to the date of the meeting).

Voting by Corporate Representatives

. To vote in person at the Share Scheme Meeting, a Zenyth Shareholder or proxy which is a body corporate may appoint an individual to act as its representative.
To vote by corporate representative at the meeting, a corporate Zenyth Shareholder or proxy should obtain an appointment. of corporate representative form from Zeayth, complete and sign the form is accordance with the instructions on it. The appointment should be lodged at the registration desk on the day of the meeting.
. The appointment of a representative may set out restrictions on the representative's powers.
· The original form of appointment of a representative, a certified copy of the appointment, or a certificate of the body corporate evidencing the appointment of a representative is prima facie. evidence of a representative having been appointed.
· The chairman of the meeting may permit a person claiming to be a representative to exercise the body's powers even if he or she has not produced a certificate or other satisfactory evidence of his or her appointment.

This page has been left blank intentionally.

Section 11 - Notice of General Meeting

Zenyth Therapeutics Limited ACN 006 614 375

Notice of General Meeting of Zenyth Therapeutics Limited Shareholders

Notice is given that a general meeting of members of Zenyth Therapeutics Limited (Zenyth) will be held at the offices of Computershare, Yarra Falls, 452 Johnston Street, Abbotsford, Victoria on 23 October 2006 commencing at 2.30pm (AEST) or immediately following the conclusion or adjournment of the Share Scheme Meeting to be held on the same day, whichever time is later.

Business

The meeting will be asked to consider and, if thought fit, to pass the following proposed resolution which will be proposed as an ordinary resolution.

Proposed Resolution

'Subject to the approval of the Share Scheme by the Court in accordance with section 411(4)(b) of the Corporations Act and the Effective Date occurring before the Quit Date, that pursuant to sections 256B and 256C of the Corporations Act 2001 (Cth) and for the purpose of the Company's Constitution, the ASX Listing Rules and for all other purposes:

(a) the issued share capital of the Company be reduced by an amount equal to the market value of all the Avexa Shares registered in the name of the Company as at the Share Scheme Record Date; and
(b) that this capital reduction be effected and satisfied by the Company distributing in specie to Scheme Shareholders all of the Avexa Shares registered in the name of the Company as at the Share Scheme Record Date in proportion to the number of Scheme Shares held by each Scheme Shareholder, with:
(i) fractional entitlements of 0.5 of an Avexa Share or over rounded up to the nearest whole number; and
(ii) fractional entitlements of less than 0.5 of an Avexa Share ignored,

and otherwise on and subject to the terms and conditions set out in the Share Scheme.'

Dated: 21 September 2006

By Order of the Board

T Mm

Robyn M Fry Company Secretary

Explanatory notes for the General Meeting

General

· Capitalised words and phrases contained in this Notice of Meeting (including the proposed resolution) have the same meaning as set out in the Glossary in Section 17 of this Explanatory Booklet, of which this notice forms part.
The reference to 'the market value of all the Avexa Shares' registered in the name of the Company as at the Share Scheme Record Date' in paragraph (a) of the resolution will be calculated by reference to the five day volume weighted average sale price. of the Avexa Shares traded on ASX for the five trading days up to the implementation Date, excluding special crossings, oversight sales and exchange traded option exercises.
. This notice should be read in conjunction with the entire Explanatory Booklet of which this notice forms part. The Explanatory Booklet contains important information to assist you in determining how to vote on the proposed resolution.

Voting Entitlements

• Each person who is registered on the Zenyth Share Register as the holder of Zenyth Shares at 7.00pm (AEST) on 21 October 2006 is entitied to attend and vote at the General Meeting, either in person, by proxy or attorney or, in the case of a corporate Zenyth Shareholder, by a personal representative.

Required Voting Majority

In accordance with section 256C(1) of the Corporations Act, the resolution at this meeting is proposed as an ordinary resolution. Accordingly, the passage of this resolution. requires the approval of at least 50% of votes cast by Zenyth Shareholders present and voting at the General Meeting, whether in person, by proxy or attorney or, in the case of a corporate Zenyth Shareholder, by a natural person representative.
· The vote will be conducted by poll.

How to Vote

Zenyth Shareholders entitled to vote at the General Meeting may vote:

by attending the meeting and voting in person; or
by appointing an attorney to attend the meeting and vote on their behat, or, in the case of corporate shareholders or proxies, a corporate representative to attend the meeting and vote on its behalf: or
by appointing a proxy to attend and vote on their behalf, using the yellow proxy form accompanying this Notice. A proxy may be an individual or a body corporate.

Voting in Person (or by Attorney)

· Zenyth Shareholders or their proxies, attorneys or representatives (including representatives of corporate proxies) wishing to vote in berson should attend the General Meeting and bring a form of personal identification (such as your driver's licence).
· To vote by attorney at this meeting, the original or a certified. copy of the power of attorney or other authority (if any) under which the instrument is signed must be received by the Zenyth Share Registry before 5,00pm (AEST) on 21 October 2006 in any of the following ways:

By post in the reply paid envelope provided to the Zenyth Share Registry:

Compatershare Investor Services Pty Limited GPO Box 242 Melhourne Victoria Australia 3001

By hand delivery to the Zenyth Share Registry at:

Compatershare Investor Services Pty Limited Yarra Falls, 452 Johnston Street. Abbotsford Victoria Australia 3067

By fax to the Zeayth Share Registry on +61 3 9473 2555.

· To vote in person, you or your proxy, attorney, representative or corporate proxy representative must attend the General Meeting to be held at the offices of Computershare, Yarra Falls, 452 Johnston Street, Abbotsford, Victoria on 23 October 2006, commencing at 2.30pm (AEST) or as soon after that time as the Share Scheme Meeting has concluded or is adjourned.
A vote cast in accordance with the appointment of a proxyor power of attorney is valid even if before the vote was cast the appointor:
died:
became mentally incapacitated:
revoked the proxy or power; or
transferred the Zenyth Shares in respect of which the vote was nast.

unless Zenyth received written notification of the death, mental incapacity, revocation or transfer before the meeting. or adjourned meeting.

Voting by Proxy

· Zenyth Shareholders wishing to vote by proxy at this meeting must:
complete and sign or validly authenticate the yellow proxy. form, which is enclosed with this Explanatory Booklet; and

Section 11 - Notice of General Meeting continued

deliver the signed and completed proxy form by 5.00pm (AEST) on 21 October 2006 in accordance with the instructions below.
A person appointed as a proxy may be an individual or a body corporate.
· An electronic authentication of an appointment of proxy must include a method of identifying the appointing Zenyth Shareholder and an indication of their approval of the information. communicated.

Submitting Proxy Votes

· Zenyth Shareholders wishing to submit proxy votes for the General Meeting must return the enclosed yellow proxy form to Zenyth in any of the following ways:

By post in the reply paid envelope provided to the Zenyth Share Registry:

Computershare Investor Services Pty Limited GPO Box 242 Melbourne Victoria Australia 3001

By hand delivery to the Zenyth Share Registry at:

Computershare Investor Services Pty Limited Yarra Falls, 452 Johnston Street Abbotsford Victoria Australia 3067

By fax to the Zenyth Share Registry on +61 3 9473 2555.

Note: proxies may not be returned by email, nor is internet based voting possible.

Notes for Proxy Appointments

A Zenyth Shareholder entitled to attend and vote at the meeting is entitled to appoint not more than two proxies to attend and vote at the meeting on that Zenyth Shareholder's behalf.
A proxy need not be a Zenyth Shareholder.
A proxy may be an individual or a body corporate. A proxy that is a body corporate may appoint a representative to exercise the powers that the body corporate may exercise as the Zenyth Shareholder's proxy.
· If a Zenyth Shareholder appoints two proxies and the appointment does not specify the proportion or namber of the Zenyth Shareholder's votes each proxy may exercise, each proxy may exercise half the votes.
A proxy may vote or abstain as he or she chooses except where the appointment of the proxy directs the way the proxy is to vote on a particular resolution. If an appointment directs the way the proxy is to vote on a particular resolution:
if the proxy is the chair the proxy must vote on a poll and must vote in the way directed; and
if the proxy is not the chair the proxy need not vote on a poll, but if the proxy does so, the proxy mast vote in the way directed.
. If a proxy appointment is signed or validly authenticated by the Zenyth Shareholder but does not name the proxy or proxies in whose favour it is given, the chairman may either act as proxy or complete the proxy appointment by inserting the name or names of one of more Directors or the Company secretary.
$\bullet$ If:
a Zenyth Shareholder nominates the chairman of the meeting as the Zenyth Shareholder's proxy; or
the chairman is to act as proxy if a proxy appointment is signed by a Zenyth Shareholder but does not name the proxies in whose favour it is given or otherwise under a default appointment according to the terms of the proxy form,

then the person acting as chairman in respect of an item of basivess at the meeting must act as proxy under the appointment in respect of that item of business.

· Proxy appointments in favour of the chairman of the meeting, the secretary or any Director which do not contain a direction. will be voted in sapport of the Special Distribution Resolution (in the absence of a more favourable proposal from another party prior to the date of the meeting).

Voting by Corporate Representatives

· To vote in person at the General Meeting, a Zenyth Shareholder or proxy which is a body corporate may appoint an individual to act as its representative.
· To vote by corporate representative at the meeting, a corporate Zenyth Shareholder should obtain an appointment of corporate representative form from Zenyth, complete and sign the form in accordance with the instructions on it. The appointment should be lodged at the registration desk on the day of the meeting.
· The appointment of a representative may set out restrictions on the representative's powers.
· The original form of appointment of a representative, a certified copy of the appointment, or a certificate of the body corporate. evidencing the appointment of a representative is prima facie. evidence of a representative having been appointed.
. The chairman of the meeting may permit a person claiming to be a representative to exercise the body's powers even if he or she has not produced a certificate or other satisfactory. evidence of his or her appointment.

Section 12 - Notice of Option Scheme Meeting

Zenyth Therapeutics Limited ACN 006 614 375

Notice of Court Ordered Meeting of Zenyth Therapeutics Limited Optionholders

Notice is given that, by an Order of the Supreme Court of Victoria (Court) made on 12 September 2006 under section 411(1) of the Corporations Act 2001 (Cth) (Corporations Act), the Court has directed that a meeting of the holders of Zenyth Options be held at the offices of Computershare, Yarra Faßs, 452 Johnston Street, Abbotsford, Victoria, on 23 October 2006 commencing at 3.00pm (AEST) or immediately following the conclusion or adjournment of the General Meeting to be held on the same day, whichever time is later.

The Court has also directed that lan Davis, or failing him James MacKenzie, act as Chairman of the meeting

Purpose of Meeting

A copy of the Option Scheme and a copy of the Explanatory Statement required by section 412 of the Corporations Act in relation to the Option Scheme are contained in the Explanatory Booklet of which this notice forms part.

Resolution

The meeting will be asked to consider and, if thought fit, pass the following resolution:

That pursuant to and in accordance with the provisions of section 411 of the Corporations Act, the holders of Zenyth Options are in favour of an arrangement proposed between Zenyth and themselves, designated the 'Option Scherne', as contained in and more particularly described in the Explanatory Booklet accompanying the Notice convening this meeting (with or without any modifications or conditions required by the Court to which Zenyth agrees) and, subject to approval of the Share Scheme and the Option Scheme by the Court, the Board of Directors of Zenyth is authorised to implement the Option Scheme with any such modifications or conditions.

Dated: 21 September 2006

By Order of the Coart

$\bigcap$ (NM)

Robyn M Ery Company Secretary

Explanatory Notes for the Option Scheme Meeting

General

· Capitalised words and phrases contained in this Notice of Meeting (including the proposed resolution) have the same meaning as set out in the Glossary in Section 17 of this Explanatory Booklet, of which this notice forms part.
. This notice should be read in conjunction with the entire Explanatory Booklet of which this notice forms part. The Explanatory Sooklet contains important information to assist. you is determining how to vote on the proposed resolution. The Explanatory Booklet includes a copy of the Option Scheme (refer Section 14) and a copy of the Explanatory Statement required by section 412 of the Corporations Act in relation. to the Option Scheme (the Explanatory Statement being all Sections of this Explanatory Booklet, other than Section 10, Section 11 and Section 12).

Voting Entitlements

. The Coart has ordered that, for the purposes of the Option. Scheme Meeting, each person registered in the Zenyth Option Register as the holder of Zenyth Options at 7.00pm (AEST) on 21 October 2006 is entitled to attend and vote at the Option. Scheme Meeting, either in person, by proxy or attorney.

Required Voting Majority

· The resolution to approve the Option Scheme is subject to approval by the majorities required under section 411(4)(a)(i) of the Corporations Act. The resolution to approve the Option Scheme must be approved by:
a majority in number (more than 50%) of Zenyth Optiocholders present and voting at the Optioc Scheme. Meeting (whether in person, by proxy or attorney); and
Zenyth Optionholders whose Zenyth Options represent at least 75% of the total amount of the debts and claims of the Optionholders present and voting at the Option Scheme. Meeting (whether in person, by proxy, by attorney). For this purpose, the 'amount' (or value) of each Optionholder's 'debt and claim' will be the same as the amount of the Option. Scheme Coasideration payable for the cancellation of that Optionholder's Options ander the Option Scheme (expressed in cents).
. The vote will be conducted by poll.

Court Approval

• In accordance with section 411(4)(b) of the Corporations Act, the Option Scheme (with or without any modification required by the Court to which Zenyth agrees) must also be approved. by an order of the Court. If the resolution put to this meeting is daly approved and if all the conditions to the Share Scheme. are satisfied or waived (as applicable). Zenyth intends to apply to the Coart for orders to give effect to the Option Scheme.

How to Vote

Zenyth Optiosholders estitled to vote at the Option Scheme Meeting may vote:

by attending the meeting and voting in person; or
by appointing an attorney to attend the meeting and vote on their behalf or, is the case of corporate optionholders or proxies. a corporate representative to attead the meeting and vote on its behalf; or
by appointing a proxy to attend and vote on their behalf, using the blue proxy form accompanying this Notice. A proxy may be an individual or a body corporate.

Voting in Person (or by Attorney)

· Zenyth Optionholders or their proxies, attorneys or representatives (including representatives of corporate proxies) wishing to vote in person should attend the Option Scheme Meeting and bring a form of personal identification (such as your driver's licence).
To vote by attorney at this meeting, the original or a certified copy of the power of attorney or other authority (if any) underwhich the instrument is signed must be received by the Zenyth Share Registry before 5.00pm (AEST) on 21 October 2006 in any of the following ways:

By post in the reply paid envelope provided to the Zenyth Share Registry:

Compatershare Investor Services Ptv Limited GPO Box 242 Melbourne Victoria Australia 3001

By hand delivery to the Zenyth Share Registry at:

Compatershare Investor Services Pty Limited Yarra Falls, 452 Johnston Street. Abbotsford Victoria Australia 3067

By fax to the Zenyth Share Registry on +61 3 9473 2555.

Section 12 - Notice of Option Scheme Meeting continued

· To vote in person, you or your proxy, attorney, representative or corporate proxy representative must attend the Option Scheme Meeting to be held at the offices of Computershare, Yarra Fa@s, Yarra Falls, 452 Johnston Street, Abbotsford, Victoria, on 23 October 2006 commencing at 3.00pm (AEST) or immediately following the conclusion or adjournment of the General Meeting.
A vote cast in accordance with the appointment of a proxy or power of attorney is valid even if before the vote was cast the appointor:
died:
became meatally incapacitated;
revoked the proxy or power; or
transferred the Zeriyth Options in respect of which the vote was cast.

anless Zenyth received written notification of the death, mental incapacity, revocation or transfer before the meeting or adjourned meeting.

Voting by Proxy

· Zenyth Optionholders wishing to vote by proxy at this meeting must:
complete and sign or validly authenticate the blue proxy form, which is enclosed with this Explanatory Booklet; and
deliver the skased and completed proxy form to Zenyth by 5.00pm (AEST) on 21 October 2006 in accordance with the instructions below.
· A person appointed as a proxy may be an individual or a body corporate.
· An electronic authentication of an appointment of proxy must include a method of identifying the appointing Zenyth Optionholder and an indication of their approval of the information. communicated.

Submitting Proxy Votes

· Zenyth Optiosholders wishing to submit proxy votes for the Option Scheme Meeting must return the enclosed blue proxy form to Zeayth in any of the following ways:

By post in the reply paid envelope provided to the Zenyth Share Registry:

Computershare Investor Services Pty Limited GPO Box 242 Melbourne Victoria Australia 3001

By hand delivery to the Zenyth Share Registry at:

Computershare layestor Services Pty Limited Yarra Falls, 452 Johnston Street Abbotsford Victoria Australia, 3067

By fax to the Zenyth Share Registry on +61 3 9473 2555.

Note: proxies may not be returned by email, nor is internet based voting possible.

Notes for Proxy Appointments

A Zenyth Optionholder entitled to attend and vote at the meeting is entitled to appoint not more than two proxies to attend and vote at the meeting on that Zenyth Optionholder's behalf.
A proxy need not be a Zenyth Optionholder.
A proxy may be an individual or a body corporate. A proxy that is a body corporate may appoint a representative to exercise the powers that the body corporate may exercise as the Zenyth Optionholder's proxy.
If a Zenyth Optionholder appoints two proxies and the appointment does not specify the proportion or number of the Zenyth Optionholder's votes each proxy may exercise, each proxy may exercise half the votes.
A proxy may vote or abstain as he or she chooses except where the appointment of the proxy directs the way the proxy is to vote on a particular resolution. If an appointment directs the way the proxy is to vote on a particular resolution:
if the proxy is the chair the proxy must vote on a poll and must vote in the way directed; and
if the proxy is not the chair the proxy need not vote on a poll, but if the proxy does so, the proxy mast vote in the way directed.
· If a proxy appointment is signed or validly authenticated by the Zenyth Optiosholder but does not name the proxy or proxies in whose favour it is given, the chairman may either act as proxy. or complete the proxy appointment by inserting the name or names of one of more Directors or the Company secretary.
$\mathbb{E}$
a Zenvils Opticaholder nominates the chairman of the meeting as the Zenyth Optionholder's proxy; or
the chairman is to act as proxy if a proxy appointment is signed by a Zenyth Optionholder but does not name the proxies in whose favour it is given or otherwise under a default appointment according to the terms of the proxy form,

then the person acting as chairman in respect of an item of basiness at the meeting must act as proxy under the appointment in respect of that item of business.

• Proxy appointments in favour of the chairman of the meeting, the secretary or any Director which do not contain a direction will be voted in support of the Option Scheme resolution (in the absence of a more favourable proposal from another party prior to the date of the meeting).

Voting by Corporate Representatives

. To vote in person at the Option Scheme Meeting, a Zenyth Optionholder or proxy which is a body corporate may appoint. an individual to act as its representative.
To vote by corporate representative at the meeting, a corporate Zenyth Optionholder or proxy should obtain an appointment of corporate representative form from Zeayth, complete and sign the form is accordance with the instructions on it. The appointment should be lodged at the registration desk on the day of the meeting.
· The appointment of a representative may set out restrictions on the representative's powers.
· The original form of appointment of a representative, a certified copy of the appointment, or a certificate of the body corporate evidencing the appointment of a representative is prima facie. evidence of a representative having been appointed.
. The chairman of the meeting may permit a person claiming to be a representative to exercise the body's powers even if he or she has not produced a certificate or other satisfactory evidence of his or her appointment.

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Section 13 - Scheme of Arrangement - Shares

Zenyth Therapeutics Limited (Target) The holders of fully paid ordinary shares in Target

	1. Definitions and Interpretation	95
	1.1 Defined Terms	95
	1.2 Interpretation	97
	2. Preliminary	97
	2.1 Target	97
	2.2 Avexa	97
	$2.3$ CSL	97
	2.4 Supporting Documents	97
3.11	Conditions Precedent	97
	4. The Share Scheme	98
	4.1 Effect of Share Scherne	98
	4.2 Procedural Matters	98
	4.3 Share Scheme Consideration	98
	5. Special Distribution	99

5.1	General	99
$5.2 -$	Ineligible Scheme Shareholders	99
5.3	Agreement to Become a Member of Avexa	99
5.4	Share Splitting	300
6.	Dealings in Shares	300
7.	Quotation of Target Shares	300
8.	Generat	301
8.1	Alterations and Conditions	301
8.2	Covenants by Scherne Shareholders	301
8.3	Status of Scheme Shares	301
8.4	Notices	301
8.5	Further Assurances	301
8.6	Costs	301
	8.7 Proper Law	301

Pursuant to Section 411 of the Corporations Act

Between

Zenyth Therapeutics Limited (ABN 37 006 614 375) (Target)

And

The holders of fully paid ordinary shares in Target

1. Definitions and Interpretation

1.1 Defined Terms

The following definitions apply unless the context requires otherwise.

ASIC means the Australian Securities and lavestments Commission

ASX means Australian Stock Exchange Limited (ABN 98 008 624 691) or, as the context requires, the financial market conducted by it.

ASX Listing Rules means the official listing rules of ASX.

Avexa means Avexa Limited (ABN 53 108 150 750).

Avexa Share means a fully paid ordinary share in the capital of Avexa.

Avexa Share Register means the register of members of Avexa maintained in accordance with the Corporations Act.

Business Day has the meaning given in the ASX Listing Rules.

CHESS means the Clearing House Electronic Subregister System for the electronic transfer of securities operated by ASX. Settlement and Transfer Corporation Pty Ltd (ABN 49 008 504 532).

Corporations Act means the Corporations Act 2001 (Cth).

Court means the Supreme Court of Victoria or any other court. of competent jurisdiction under the Corporations Act determined by Target.

Court Order means the order of the Court approving this Share Scheme under section 411(4)(b) of the Corporations Act.

Court Order Time means 8.00am (Melbourne time) on the first day on which the Court hears the application for an order pursuant to section 413(4)(b) of the Corporations Act to approve this Share. Scheme or, if the application is adjourned or subject to appeal for any reason, the day on which the adjoarned or appealed application is heard.

CSL means CSL Limited (ABN 99 051 588 348).

Deed Poll means the Deed Poll executed by CSL, pursuant to which CSL coverants to perform its obligations contemplated. ander this Share Scheme.

Effective means, when used in relation to this Share Scheme. the coming into effect, pursuant to section 411(10) of the Corporations Act, of the Coart Order.

Effective Date means the date on which this Share Scheme becomes Effective.

Excluded Share means any Target Share held by any person on behalf of or for the benefit of CSL or any of its Related Entities.

Explanatory Booklet means the document despatched to Target Shareholders comprising:

(a) the terms of this Share Scheme and the Option Scheme;
(b) a notice convening the Share Scheme Meeting, a notice convening the Option Scheme Meeting and a notice convening a general meeting of Target Shareholders to consider and vote on the Special Distribution Resolution (together with proxyforms for those meetings);
(c) an explanatory statement in relation to this Share Scheme. the Option Scheme and the Special Distribution issued by Target under sections 412 and 256C(4) of the Corporations Act;
(d) an independent expert's report in relation to this Share Scheme, the Option Scheme and the Special Distribution; and
(e) a copy of the Merger Implementation Deed and the Deed Poll.

Foreign Scheme Shareholder means a Scheme Shareholder whose Registered Address is in any jurisdiction other than Australia and its external territories or New Zealand.

Holder of a Non-Marketable Parcel means a Scheme Shareholder whose Special Distribution Entitlement would cause that Scheme Shareholder to receive a transfer of Avexa Shares that would result in the Scheme Shareholder holding less than a marketable parcel as defined in the ASX Listing Rules.

Implementation Date means, in relation to this Share Scheme and the Special Distribution, the third Business Day after the Record Date or such other date as CSL and Target agree in writing.

Section 13 - Scheme of Arrangement - Shares continued

Ineligible Scheme Shareholder means, for the parpose of participating in the Special Distribution, a Holder of a Non-Marketable Parcel or a Foreign Scheme Shareholder.

Merger Implementation Deed means the agreement of that name between CSL and Target dated 17 July 2006.

Nominee means Merrill Lynch Equities (Australia) Limited or such other person nominated by Target to sell or facilitate the transfer of the Avexa Shares attributable to Ineligible Scheme Shareholders, on behalf of the Ineligible Scheme Shareholders, ander the terms of this Share Scherne and the Special Distribution.

Option Scheme means the proposed creditors' scheme of Arrangement under Part 5.1 of the Corporations Act between. Target and the holders of certain options over unissued Target Shares

Option Scheme Meeting means the meeting ordered by the Court to be convened parsuant to section 411(1) of the Corporations Act is respect of the Optios Scheme.

Quit Date means 17 November 2006 or such later date as CSL and Target agree in writing.

Record Date means, in relation to this Share Scheme and the Special Distribution, 5.00pm on the fifth Business Day after the Effective Date or such other date as CSL and Target agree in writing.

Registered Address means the address of each Target Shareholder as recorded in the Target Share Register.

Second Court Date means the first day on which an application made to the Court for an order approving the Share Scheme. pursuant to section 413(4)(b) of the Corporations Act is heard. or, if the application is adjourned for any reason, the first day on which the adjourned application is heard.

Share Scheme means this scheme of arrangement, subject to any atterations or coaditions made or required by the Court under section 411{6} of the Corporations Act and approved in writing by Target and CSL.

Share Scheme Conditions means the conditions in clause 3.3 of the Merger Implementation Deed.

Share Scheme Consideration means the amount of \$0.82 cash for each Scheme Share.

Share Scheme Meeting means the meeting ordered by the Courtto be convened parsuant to section 411(1) of the Corporations Act in respect of this Share Scheme.

Scheme Shareholder means each person registered in the Target Share Register as the holder of Target Shares as at the Record ata ()

Scheme Shares means all of the Target Shares on issue as at the Record Date other than the Excluded Shares (if any).

Scheme Share Transfer means, for each Scheme Shareholder. a proper instrument of transfer of their Scheme Shares for the purpose of section 10718 of the Corporations Act, which may be a master transfer of all Scheme Shares.

Special Distribution means the proposed in specie distribution to be made by Target to Scheme Shareholders of all of the Avexa Shares registered in the name of Target as at the Record Date, subject to and in accordance with the Special Distribution. Resolution and this Share Scheme.

Special Distribution Entitlement means the entitlement of a Scheme Shareholder to participate in the Special Distribution, determined in accordance with the Special Distribution Resolution and this Share Scheme.

Special Distribution Resolution means the proposed ordinary resolution to approve the Special Distribution, as set out in the notice of meeting for the general meeting and contained in the Explanatory Booklet.

Target Share means a fully paid ordinary share in the capital of Target.

Target Shareholder means each person registered in the Target Share Register as the holder of Target Shares.

Target Share Register means the register of members of Target maintained in accordance with the Corporations Act.

Target Share Registry means Computershare Investor Services Pty Limited as registrar of the Target Share Register.

1.2 Interpretation

Headings are for convenience only and do not affect interpretation. The following rules apply unless the context requires otherwise.

(a) The singular includes the plural and conversely.
(b) A geader includes all genders.
(c) A reference to a clause is a reference to a clause of this Share Scheme, unless otherwise stated,
(d) Where a word or phrase is defined, its other grammatical forms have a corresponding meaning.
(e) A reference to a person, corporation, trust, partnership, usincorporated body, government agency or other entity includes any of them.
(f) A reference to a person includes a reference to the person's executors, administrators, successors and permitted substitutes.
(g) A reference to an agreement or document (including, without limitation, a reference to this document) is to the agreement or document as amended, varied, supplemented, novated or replaced, except to the extent prohibited by this document or that other agreement or document.
(h) A reference to any legislation or to a provision of any legislation. includes a modification or re-enactment of it, any legislative provision substituted for it and all regulations and statutory. instruments issued under it.
Words and phrases not specifically defined in this document 夼 have the same meanings (if any) given to them in the Corporations Act.
{i) A reference to \$ is to the lawful currency of Australia.

2. Preliminary

2.1 Target

(a) Target is a public company limited by shares, incorporated in Australia and registered in Victoria. Its registered office is at 576 Swan Street, Richmond, Victoria.
(b) Target is admitted to the official list of ASX and Target Shares. are officially quoted on the financial market conducted by ASX.
(c) As at the date of the Explanatory Booklet, 125,176,327. Target Shares were on issue.

2.2 Avexa

(a) Avexa is a public company limited by shares, incorporated in Australia and registered in Victoria, its registered office is at 576 Swan Street, Richmond, Victoria.
(b) Avexa is admitted to the official list of ASX and Avexa's shares are officially gaoted on the financial market conducted by ASX.
(c) As at the date of the Explanatory Booklet, 197,854,554 Avexa Shares were on issue and Target was registered as the holder of 21,062,000 Avexa Shares, representing approximately 10.65% of the issued share capital of Avexa as at that date.

2.3 CSI

(a) CSL is a public company limited by shares, incorporated in Australia and registered in the Australian Capital Territory. its registered office is at 45 Poplar Road, Parkville, Victoria.
(b) CSL is admitted to the official list of ASX and CSL's shares are officially gaoted on the financial market conducted by ASX.

2.4 Supporting Documents

(a) Target and CSL have agreed, by executing the Merger Implementation Deed, to implement the terms of and to perform their respective obligations under this Share Scherne, the Option Scheme and the Special Distribution.
(b) CSL has executed a Deed Poll in favour of Scheme Shareholders pursuant to which CSL has covenanted to carry out the obligations to be performed by it under this Share Scheme.
(c) if this Share Scheme becomes Effective. Target endertakes in favour of each Scheme Shareholder that it will enforce the Deed Poll against CSL on behalf of and as agent and attorney for Scheme Shareholders.

3. Conditions Precedent

(a) This Share Scheme is conditional on:
(i) all of the Share Scheme Conditions having been satisfied or waived in accordance with the terms of the Merger Implementation Deed;
(a) the Merger Implementation Deed having not been terminated as at the Court Order Time; and
(iii) such other conditions imposed by the Court ander section 411(6) of the Corporations Act as are acceptable. to CSL and Target.
(b) The falliment of each condition in clause 3(a) is a condition precedent to the binding effect of this Share Scheme.

Section 13 - Scheme of Arrangement - Shares continued

(c) On the Second Coart Date, Target mast provide to the Court a certificate coafirmiag whether or not all the coaditions. precedent to this Share Scheme have been satisfied or waived, other than the condition in clause 3.1@ of the Merger Implementation Deed.
(d) This Share Scheme will lapse and be of no further force or effect if the Effective Date has not occurred on or before the Quit Date or such later date as the Court, with the consent of Target and CSL, may order.
(e) For the avoidance of doubt, it is acknowledged that the Share Scheme is not conditional on the Option Scheme becoming Effective or the Special Distribution Resolution being approved or implemented.

4. The Share Scheme

4.1 Effect of Share Scheme

(a) If this Share Scheme becomes Effective them:
(i) all the Scheme Shares (together with all rights and entitiements attaching to the Scheme Shares) will be transferred to CSL:
(ii) Target will enter the name of CSL in the Target Share Register in respect of all the Scheme Shares; and
(iii) CSL will provide the Scheme Consideration to Scheme Shareholders.
in accordance with the provisions of this Share Scheme.
(b) If this Share Scheme becomes Effective, it will
(i) bind Target and all Scheme Shareholders, including those who do not attend the Scheme Meeting, those who do not vote at that meeting and those who vote against this Share Scheme at that meeting; and
(ii) override the constitution of Target, to the extent of any inconsistency.

4.2 Procedural Matters

(a) If the Court makes the Court Order, Target will lodge with ASIC office copies of that order as soon as practicable and by no later than 5.00pm on the first Business Day after the date on which that order is made.
(b) This Share Scheme will come into effect on the Effective Date.
(c) On or before 12.00 noon (Melbourne time) on the Implementation Date:
6) CSL must provide evidence to Target that the Scheme Consideration is or will be available for payment to Scheme Shareholders in accordance with this Share Schemer
fili all of the Scheme Shares will be transferred to CSL. without the need for any further act by any Scheme. Shareholder (other than acts performed by Target as attorney and agent of the Scheme Shareholders ander clause 8.2):
fiii) Target will deliver to CSL dufy completed and executed Scheme Share Transfers to transfer all of the Scheme Shares to CSL:
(iv) the Scheme Shares together with all rights and entitlemests attaching to the Scheme Shares as at that time will be transferred to CSE: and
(v) in consideration for the transfer of the Scheme Shares. CSL will provide the Share Scheme Consideration to each Scheme Shareholder in respect of each Scheme Share registered in the name of that Scheme Shareholder in the Target Share Register on the Record Date.
(d) CSL will immediately execute the Scheme Share Transfers referred to in Clause 4.2(c)(iii) as transferee and deliver the Scheme Share Transfers to Target for registration.
(e) Target will, immediately following receipt of the Scheme Share Transfers in respect of the Scheme Shares, enter the name and address of CSL in the Target Share Register in respect of all the Scheme Shares.

4.3 Share Scheme Consideration

(a) The obligations of CSL to pay the Share Scheme Consideration will be satisfied by CSL dispatching or procuring the dispatch within five Business Days of the Implementation Date to each Scheme Shareholder by prepaid post to their Registered Address a cheque in Australian. currency drawn on an Aastralian bank in the name of that Scheme Shareholder for the amount equal to the namber of Scheme Shares held by that Scheme Shareholder multiplied by the Share Scheme Consideration.
(b) In the case of joint holders of Scheme Shares, a cheque shall be payable and forwarded in the names of those joint holders.

5. Special Distribution

5.1 General

(a) Subject to the Special Distribution Resolution being duly passed, on the implementation Date:
(i) Target will reduce its share capital in accordance with the Special Distribution Resolution; and
(ii) Target will satisfy the Special Distribution Entitlement of each Scheme Shareholder is accordance with the provisions of this clause 5.
(b) On the implementation Date, but prior to completion of the transfer of the Scheme Shares to CSL ander clauses 4.2(c) to 4.2(e), and without the need for any further act by a Scheme Shareholder, Target will satisfy the Special Distribution Entitlement of each Scheme Shareholder as follows:
(i) in the case of a Scheme Shareholder that is not an ineligible Scheme Shareholder, by:
- (A) transferring to the Scheme Shareholder that number of Avexa Shares provided for in the Special Distribution Resolution: and
- (8) procaring the entry in the Avexa Share Register of the name of the Scheme Shareholder in respect of the Avexa Shares transferred to it and the issue of a holding statement for those Avexa Shares to that Scheme Shareholder; or
(ii) in the case of a Scheme Shareholder who is an ineligible. Scheme Shareholder, in accordance with clause 5.2.
(c) The Avexa Shares transferred to Scheme Shareholders ander clause 5.1(b)(i) will be transferred with all rights and entitlements. attaching to the Avexa Shares at that time and free from all mortgages, charges, liens, encambrances and interests of third parties of any kind, whether legal or otherwise.

5.2 Ineligible Scheme Shareholders

(a) Target's obligations to satisfy the Special Distribution. Entitlement of an ineligible Scheme Shareholder will be satisfied by Target:
fi) transferring to the Nominee all of the Avexa Shares to which the Ineligible Scheme Shareholder would have been entitled were they not an ineligible Scheme Shareholder: and
fiil procuring that the Nominee, as soon as reasonably practicable after the implementation Date:
(A) sells on ASX or places for the benefit of the ineligible Scheme Shareholder those Avexa Shares transferred to the Nominee ander clause 5.2(a)(i):
(B) accounts to the Ineligible Scheme Shareholder for the net proceeds of sale (on an averaged basis so that all ineligible Scherne Shareholders receive the same price per Avexa Share, subject to rounding down to the nearest whole cent) and any income referable to those Avexa Shares, after deduction of any applicable. brokerage, taxes and charges (Net Proceeds); and
(C) remits the Net Proceeds to the Ineligible Scheme Shareholder in full setisfaction of the Ineligible Scheme. Shareholder's rights under this clause 5. The Net-Proceeds are to be dispatched by pre-paid postto the Ineligible Scheme Shareholder's address as shown in the Target Share Register by cheque in Australian currency drawn on an Australian bank. In the case of joint holders of Target Shares, the cheque will be made payable to and forwarded to the holder. whose name appears first in the Target Share Register on the Record Date.
(b) To the maximum extent permitted by law, Target, CSL and the Nominee will not be liable for any loss, cost, expense or liability (Loss) in connection with the sale of the Avexa Shares on behalf of Ineligible Scheme Shareholders as contemplated by this clause 5.2, unless (and to the extent only to which). Target, CSE or the Nominee (as the case may be) encages. in nealigent, fraudelent or dishonest conduct which directly causes the relevant Loss.

5.3 Agreement to Become a Member of Ayexa

Each Scheme Shareholder, other than Ineligible Scheme Shareholders, without the need for any farther act by a Scheme-Shareholder:

(a) accepts the Avexa Shares transferred to them pursuant to the Special Distribution Resolution on the terms and conditions of the constitution of Avexa;
(a) agrees to become a member of Avexa, to have their name entered in the Avexa Share Register and to be bound by the constitution of Avexa: and
(b) acknowledges and agrees that the transfer to them of the Avexa Shares in accordance with the Special Distribution. Resolution and this Share Scheme constitutes the full satisfaction of their Special Distribution Entitlement.

Section 13 - Scheme of Arrangement - Shares continued

5.4 Share Splitting

(a) If Target is of the opinion that any Target Shareholders have, before the Record Date, been party to shareholding splitting or division in an attempt to obtain advantage by reference to the rounding provided for in the calculation of the Special Distribution Entitlement, Target may give notice to those Target Shareholders:
筍 setting out the names and registered addresses of all of them:
(ii) stating that opinion; and
(iii) attributing to one of them specifically identified in the notice the Target Shares held by all of them.

and, after the notice has been so given, the Scheme Shareholder specifically identified in the notice shall, for the perposes of calculating their Special Distribution Entitlement, be taken to hold all those Target Shares and each of the other Target Shareholders whose names are set out in the notice shall, for the purposes of calculating their Special Distribution Entitlements, be taken to hold no Target Shares.

(b) If Target is of the opinion that any Target Shareholders have, before the Record Date, been party to shareholding splitting or division in an attempt to qualify as Holders of a Non-Marketable Parcel (and therefore ineligible Scheme Shareholders to whom clause 5.2 applies). Target may give notice to those Target Shareholders:
setting out the names and registered addresses 夼 of all of them:
(ii) stating that opinion; and
(iii) attributing to one of them specifically identified in the notice the Target Shares held by all of them,

and, after the notice has been so given, the Scheme Shareholder specifically identified in the notice shall, for the purposes of determining whether they are a Holder of a Non-Marketable Parcel (and therefore an Ineligible Scheme Shareholder), be taken to hold all those Target Shares and each of the other Target Shareholders whose names are set out in the notice shall, for the purposes of determining. whether they are a Holder of a Non-Marketable Parcel (and therefore an ineligible Scherne Shareholder), be taken to hold no Target Shares.

6. Dealings in Shares

(a) For the purpose of establishing the persons who are Scheme Shareholders, dealings in Target Shares will only be recognised if:
{i) in the case of dealings of the type to be effected using CHESS, the transferee is registered in the Target Share Register as the holder of the relevant Target Shares by the Record Date: and
(ii) in all other cases, registrable transfers or transmission applications in respect of those dealings are received at the Target Share Registry by the Record Date.
(b) Target will register registrable transfers or transmission applications of the kind referred to in clause 6(a)(ii) by, or as soon as practicable after, the Record Date.
(c) Target will not accept for registration, nor recognise for any purpose, any transfer or transmission application in respect of Scherne Shares received after the Record Date.
(d) Target will maintain or produre the maintenance of the Target Share Register in accordance with this clause 6. The Target Share Register is this form will solely determine the persons who are Scherne Shareholders and their entitiements to the Share Scheme Consideration and the Special Distribution Entitlement
(e) From the Record Date, all holding statements for Target Shares will cease to have effect as documents of title, and each entry on the Target Share Register at the Record Date will cease to have any effect other than as evidence of the entitlements of Scheme Shareholders to the Share Scheme Consideration and the Special Distribution Entitlement.
(f) On or before 9.00am on the Implementation Date, Target will give to CSL details of the names and addresses shown in the Target Share Register of all Scheme Shareholders and of the aumber of Scheme Shares held by each of them on the Record Date.

7. Quotation of Target Shares

(a) It is expected that the suspension of trading in Target Shares on ASX will occur from the close of trading on the day onwhich Target notifies ASX that the Court has approved this Share Scheme under section 411(4)(b) of the Corporations Act.
(b) On a date after the Implementation Date to be determined by CSL, Target will apply for termination of the official quotation. on ASX of Target Shares and will apply to have itself removed from the official list of ASX.

8. General

8.1 Alterations and Conditions

If the Court proposes to approve this Share Scheme subject to any alterations or conditions, Target may, by its counsel or solicitors. bat subject to the prior approval of CSL, consent on behalf of all Scheme Shareholders to those alterations or conditions.

8.2 Covenants by Scheme Shareholders

(a) Each Scheme Shareholder:
(i) agrees to the transfer of all of their Scheme Shares to CSL in accordance with this Share Scheme;
(ii) agrees to the modification or variation of the rights attaching to their Scheme Shares arising from this Share Scheme and the Special Distribution;
(iii) without the need for any farther act, irrevocably appoints Target and each of its directors and officers, jointly and severally, as that Scheme Shareholder's attorney and agent for the purpose of executing any document or doing any other act necessary to give full effect to this Share Scheme, the Special Distribution and the transactions contemplated by them, including without limitation, the provision of a Scheme Share Transfer or an Avexa Share transfer: and
(iv) consents to Target doing all things and executing all deeds, instruments, transfers or other documents as may be necessary or desirable to give full effect to this Share Scheme, the Special Distribution and the transactions contemplated by them.
(b) From the Effective Date antil Target registers CSL as the holder of all Scheme Shares in the Target Share Register, each Scheme Shareholder is deemed to have appointed Target as its attorney and agent (and directed Target in such capacity). to appoint the Chairman of CSL as its sole proxy and, where applicable, corporate representative to attend shareholder meetings of Target, exercise the votes attaching to the Scheme Shares of which they are the registered holder and sign any Target Shareholders' resolution, and no Scheme Shareholder may attend or vote at any of those meetings or sign or vote on any resolutions (whether in person, by proxy or by corporate representative) other than pursuant to this clause 8.2(b). Target undertakes in favour of each Scheme-Shareholder that it will appoint the Chairman of CSL as the Scheme Shareholder's proxy or, where applicable, corporate representative in accordance with this clause 8.2(b).

8.3 Status of Scheme Shares

(a) The Scheme Shares transferred to CSL under this Share Scheme will be transferred free from all mortgages, charges, liens, encumbrances and interests of third parties of any kind, whether legation otherwise. The Scheme Shareholders are deemed to have warranted to CSL shat all their Scheme. Shares (including any rights and entitlements attaching to those shares) which are transferred to CSL under this Share Scheme will, at the date of the transfer of them to CSL. be fally paid and free from all mortgages, charges, fiens, encumbrances and interests of third parties of any kind, whether legal or otherwise, and that they have full power and capacity to self and to transfer their Scheme Shares (including any rights and entitiements attaching to those shares).
(b) CSL will be beneficially entitled to the Scheme Shares transferred to it under this Share Scheme pending registration. by Target of the name and address of CSL in the Target Share Register as the holder of the Scheme Shares.

8.4 Notices

Where a notice, transfer, transmission application, direction or other communication referred to in this Share Scheme is sent. by post to Target, it will not be deemed to be received in the ordinary course of post or on a date other than the date (if any). on which it is actually received at Target's registered office.

8.5 Further Assurances

Target will do all things and execute all deeds, instruments, transfers or other documents as may be necessary or desirable. to give fall effect to this Share Scheme, the Special Distribution. and the transactions contemplated by them.

8.6 Costs

Target will pay the costs of this Share Scheme and the Special Distribution, except that CSL will pay any stamp daty payable on:

(a) the transfer by Scheme Shareholders of the Scheme Shares to CSL: and
(b) the transfer by Target of the Avexa Shares to Scheme Sharebolders (other than Ineligible Scheme Shareholders).

8.7 Proper Law

The proper law of this Share Scheme is the law of Victoria.

This page has been left blank intentionally.

Section 14 - Scheme of Arrangement - Options

Zenyth Therapeutics Limited

and

The holders of options to subscribe for fully paid ordinary shares in Zenyth Therapeutics Limited

1.	Definitions and Interpretation	105
1.3	Definitions	105
1.2	Interpretation	106
2.	Preliminary	107
23	Target	107
2.2	Miscellaneous	107
3.	Conditions Precedent	107
4.	Implementation	107
5.	Options Scheme Consideration	107
6.	Exercise Restrictions of Target Options	107
7.	General	108
73	Option Scheme Alterations and Conditions	108
7.2	Covenants by Scheme Optionholders	108
7.3	Effect of Option Scheme	108
7.4	Notices	108
7.5	Further Assurances	108
7.6	Costs	108
7.7	Proper Law	108
	Schedule 1	108

Pursuant to section 411 of the Corporations Act 2001 (Cth)

Between

Zenyth Therapeutics Limited (ABN 37 006 614 375) (Target)

And

The holders of options to subscribe for fully paid ordinary shares in Target.

1. Definitions and Interpretation

1.1 Definitions

In this document, the following definitions apply enless the context requires otherwise.

ASIC means the Australian Securities and Investments Commission.

ASX means Australian Stock Exchange Limited (ABN 98 008 624 691) or, as the context requires, the financial market conducted by it.

ASX Listing Rules means the official listing rules of ASX.

Business Day has the meaning given in the ASX Listing Rules.

Corporations Act means the Corporations Act 2001 (Cth).

Court means the Sapreme Court of Victoria or any other court. of competent jurisdiction under the Corporations Act determined by Target.

Court Order means, when used in relation to this Option Scheme, the order of the Court approving this Option Scheme under section. 411(4)(b) of the Corporations Act, and when used in relation to the Share Scheme, the order of the Court approving the Share Scheme under section 411(4)(b) of the Corporations Act.

Court Order Time means 8.00am (Melbourne time) on the first day on which the Court hears the application for an order parsaant to section 411(4)(b) of the Corporations Act to approve this Option. Scheme or, if the application is adjourned or subject to appeal for any reason, the day on which the adjourned or appealed application is heard.

CSL means CSL Limited (ABN 99 051 588 348).

Deed Poll means the Deed Poll executed by CSL that is relevant to the Share Scheme.

Effective means, when used in relation to this Option Scheme or the Share Scherne, the coming into effect, pursuant to section 411(10) of the Corporations Act, of the Court Order.

Explanatory Booklet means the document despatched to Target Shareholders comprising:

(a) the terms of the Share Scheme and this Option Scheme;
(b) a notice convening the Share Scheme Meeting, a notice convenisg the Option Scheme Meeting and a notice convenisg. a general meeting of Target Shareholders to consider and vote on the Special Distribution Resolution (together with proxy forms for those meetings):
(c) an explanatory statement in relation to the Share Scheme, this Option Scheme and the Special Distribution issued by Target under sections 412 and 256C(4) of the Corporations Act;
(d) an independent expert's report in relation to the Share Scheme, this Option Scheme and the Special Distribution; and
(e) a copy of the Merger Implementation Deed and the Deed Poll.

July 2006 Management Options means 1,000,000 options to acquire by way of issue a like number of Target Shares issued by the Target in July 2006 to certain senior executives of Target. exercisable at \$0.62 and otherwise issued in accordance with the Target Option Plan.

Merger Implementation Deed means the agreement of that name between CSL and Target dated 17 July 2006.

Option Scheme means this creditors' scheme of arrangement ander Part 5.1 of the Corporations Act between Target and the holders of options over unissued Target Shares, but excluding the July 2006 Management Options, subject to any alterations. or conditions made or required by the Coart parsuant to section. 411(6) of the Corporations Act and approved in writing by CSL. and Target.

Option Scheme Consideration has the meaning given to that term in classe 5.

Option Scheme Effective Date means the date on which this Option Scheme becomes Effective.

Option Scheme Implementation Date means the fifth Business Day after the Option Scheme Record Date or such other date as CSL and Target agree in writing.

Option Scheme Meeting means the meeting ordered by the Court to be convened pursuant to section 411(1) of the Corporations Act in respect of the Option Scheme.

Section 14 - Scheme of Arrangement - Options continued

Option Scheme Record Date means 5.00pm on the third Business Day after the Option Scheme Effective Date, or such other time or date as CSL and Target may agree in writing.

Quit Date means 17 November 2006 or such later date as CSE. and Target agree in writing.

Registered Address means the address of each Target Optionholder as recorded in the Target Option Register.

Scheme Optionholder means any Target Optionholder at the Option Scheme Record Date.

Scheme Options means Target Options held by Scheme Optionholders at the Option Scheme Record Date.

Share Scheme means the scheme of arrangement in respect of Target Shares, subject to any alterations or conditions made or regaired by the Court ander section 411(6) of the Corporations Act and approved in writing by Target and CSL.

Share Scheme Conditions means the conditions in clause 3.3 of the Merger Implementation Deed.

Share Scheme Effective Date means the date on which the Share Scheme becomes Effective.

Share Scheme Meeting means the meeting ordered by the Courtto be convened parsuant to section 411(1) of the Corporations Act in respect of the Share Scheme.

Share Scheme Record Date means, in relation to the Share Scheme, 5.00pm on the fifth Basiness Day after the Share Scheme Effective Date or such other time or date as CSL and Target agree in writing.

Special Distribution and Special Distribution Resolution have the meaning given to those terms in the Merger Implementation Deed.

Target Option means an option to subscribe for a Target Share. granted under the terms and conditions of the Target Option Plan, including those options set out in Schedele 1 or otherwise graated by Target to Target executive directors and Target former executive directors in accordance with option incentive plans approved by Target Shareholders in general meeting, but excluding the July 2006 Management Options.

Target Optionholder means any person who is registered in the Target Option Register as the holder of a Target Option.

Target Option Plan means Target's Key Employee Share Option Plan.

Target Option Register means the register of holders of Target Options maintained pursuant to sections 168 and 170 of the Corporations Act.

Target Share means a fully paid ordinary share in the capital of Target.

Target Shareholder means each person registered in the Target Share Register as the holder of Target Shares.

Target Share Register means the register of members of Target maintained in accordance with the Corporations Act.

1.2 Interpretation

Headings are for convenience only and do not affect interpretation. The following rales apply unless the context requires otherwise:

(a) The singular includes the plural and conversely.
(b) A gender includes all genders.
(c) A reference to a clause is a reference to a clause of this Option Scheme, anless otherwise stated.
(d) Where a word or phrase is defined, its other grammatical forms have a corresponding meaning.
(e) A reference to a person, corporation, trust, partnership, anincorporated body, government agency or other entity includes any of them.
(f) A reference to a person includes a reference to the person's executors, administrators, successors and permitted substitutes.
(c) A reference to an agreement or document (including, without limitation, a reference to this document) is to the agreement. or document as amended, varied, supplemented, novated or replaced, except to the extent prohibited by this document. or that other agreement or docament.
(h) A reference to any legislation or to a provision of any legislation includes a modification or re-enactment of it, any legislative provision substituted for it and all regulations and statutory instruments issued ander it.
Words and phrases not specifically defined in this document 角。 have the same meanings (if any) given to them in the Corporations Act.
(i) A reference to \$ is to the lawful currency of Australia.

2. Preliminary

2.1 Target

(a) Target is a public company limited by shares, incorporated in Australia and registered in Victoria. Its registered office is at 576 Swaa Street, Richmond, Victoria.
(b) Target is admitted to the official list of ASX and Target Shares are officially gaoted on the financial market conducted by ASX.
(c) As at the date of the Explanatory Booklet, 5,439,650 Target Options were on issue. Target Options are not quoted on any financial market.

2.2 Miscellaneous

CSL and Target have entered into the Merger Implementation. Deed to facilitate, amongst other things, the implementation of the Option Scheme. In particular, parsuant to the Merger Implementation Deed, Target has agreed to carry out the obligations contemplated of it under the Option Scheme.

3. Conditions Precedent

(a) The Option Scheme is conditional on:
(i) the falliment of all the Share Scheme Conditions:
(ii) the grant of a waiver by ASX of any requirement under ASX Listing Rale 6.23 to obtain the approval of Target. Shareholders for the cancellation of all of the Target Options parsuant to the Option Scheme, or failing the grant of the waiver, the approval by a majority of Target Shareholders of a resolution (in a form acceptable to Target and CSL) approving the cancellation of the Target Options under the Option Scheme;
(iii) the approval of the Option Scheme by the requisite majority of Target Optionholders at the Option Scheme Meeting;
(iv) the approval of the Option Scheme, with or without modification, by order of the Coart parsuant to section 411(4)(b) of the Corporations Act;
(v) the lodgment with ASIC of an office copy of the Court Order approving the Option Scheme pursuant to section 411(4)(b) of the Corporations Act; and
(v) the fulfilment of such other conditions imposed by the Coart under section 411(6) of the Corporations Act as are acceptable to Target and CSL (if any).
(b) The faltilment of each condition in clause 3(a) is a condition precedent to the binding effect of the Option Scheme.
(c) The Option Scheme will lapse and be of no further force or effect if the Option Scheme Effective Date has not occurred on or before the Ouit Date or such later date as the Court. with the consent of Target and CSL, may order.
(d) If the Merger Implementation Deed is terminated, Target is released from any further obligation to take steps to implement. the Option Scheme and any liability with respect to the Option Scheme.

4. Implementation

(a) On the Option Scheme Implementation Date, all of the Scheme Options, and all of the rights and entitlements. attaching to the Scherne Options, will be cancelled without the need for any further act by any Scheme Optionholder.
(b) In consideration for the cancellation of the Scheme Options, Target will pay to each Scheme Optionholder, the Option Scheme Consideration payable in respect of the Scheme. Options held by the Scherne Optionholder.

5. Option Scheme Consideration

(a) The Option Scheme Consideration in respect of the Scheme Options is as set out in Schedele 1 (Option Scheme Consideration).
(b) The obligation of Target to pay the Option Scheme. Consideration will be satisfied by Target dispatching or procaring the dispatch within five Business Days of the Option Scheme Implementation Date to each Scheme. Optionholder by pre-paid post to their Registered Address a cheque in Australian currency drawn on an Australian bank in the name of the Scheme Optionholder for the amount equal to the number of Scheme Options held by that Scheme. Optionholder malablied by the Option Scheme Consideration in respect of each of those Scheme Options.

6. Exercise Restrictions of Target Options

(a) Target will not accept as valid, nor recognise for any purpose, any notice of exercise of a Target Option received:
(i) by the Option Scheme Record Date otherwise than inaccordance with the terms and conditions of the Target Option Plan pursuant to which that Target Option was granted; or
(ii) after the Option Scheme Record Date.

Section 14 - Scheme of Arrangement - Options continued

(b) Target will issue, and register the relevant Target Optionholder as the holder of, a Target Share resulting from the exercise of a Target Option in accordance with clause 6(a)(i) by the Share Scheme Record Date, in accordance with the Target Option Plan.
(c) For the purpose of determining participation in the Option. Scheme, Target will maintain or procure the maintenance of the Target Option Register in accordance with this clause 6. and the Target Option Register in this form will solely determine. entitlements to participate in the Option Scheme.

7. General

7.1 Option Scheme Alterations and Conditions

If the Coart proposes to approve the Option Scheme subject to any alterations or conditions, Target may, by its counsel or solicitors, consent on behalf of all persons concerned (including Target Opticeholders) to those alterations or conditions.

7.2 Covenants by Scheme Optionholders

Each Scheme Optionholder consents to Target doing all things and executing all deeds, instruments, transfers or other documents as may be necessary or desirable to give fall effect to the Option. Scheme and the transactions contemplated by it.

7.3 Effect of Option Scheme

The Option Scheme binds Target and all Target Optionholders and, to the extent of any inconsistency, overrides the constitution of Target and the terms and conditions of the Target Option Plan.

7.4 Notices

Where a notice, application, direction or other communication. referred to in the Option Scheme is sent by post to Target, it will not be deemed to be received in the ordinary coarse of post. or on a date other than the date (if any) on which it is actually received at Target's registered office (marked to the attention of the Target Option Plan secretary).

7.5 Further Assurances

Target will do all things and execute all deeds, instruments, transfers or other documents as may be necessary or desirable to give fall. effect to the Option Scheme and the transactions contemplated by it.

7.6 Costs

Target will pay the costs of the Option Scheme.

7.7 Proper Law

The proper law of the Option Scheme is the law of Victoria.

Schedule 1

Target Options

Number			Exercise	Option Scheme Consideration	Total Option Scheme Consideration
of Options	Issue Date	Expiry Date	Price	per Option	Payable
250,000	14-Nov-01	14-Nov-06	\$0.73	\$0.1063	\$26,565
500,000	30-Nov-01	$30 - Nov - 06$	\$1.28	\$0.0100	\$5,000
500.000	30-Nov-01	30-Nov-06	\$2.02	\$0.0100	\$5,000
650,000	13-Dec-01	13-Dec-06	\$0.88	\$0.0100	\$6,500
50,000	23-Jan-03	23-Jan-08	\$0.34	\$0.5196	\$25,980
200,000	16-Oct-04	16-0ct-07	\$0.84	\$0.0592	\$11,839
349,650	31-Mar-04	31-Mar-09	\$0.84	\$0.1168	\$40,843
550,000	21-Feb-05	30-Jan-09	\$0.84	\$0.1297	\$71,338
400,000	19-Jan-05	19-3an-10	\$0.84	\$0.1513	\$60,523
1,000,000	08-Aug-05	30-Jun-10	\$0.62	\$0.3363	\$336,274
200.000	07-Nov-05	30-Jun-11	\$0.62	\$0.3645	\$72,896
200,000	07-Nov-05	30-Jan-12	\$0.62	\$0.3911	\$78,228
200,000	07-Nov-05	30-Jun-13	\$0.62	\$0.4162	\$83,240
200.000	24-Feb-06	30-Jan-10	\$0.62	\$0.3363	\$67,260
5,249,650					\$891,486

Section 15 - Marger Inibiana katong pada ano Decembol

Section 15 - Merger Implementation Deed and Deed Poll

Merger Implementation Deed

CLS Limited Zenyth Therapeutics Limited

1.	Definitions and Interpretation	111
1.1	Definitions	771
1.2	interpretation	736
2.	Implementation of the Schemes	116.
З,	Conditions	336
3.1	Conditions	116
3.2	Benefit and Waiver of Conditions	337
$3.\overline{3}$	Reasonable Endeavours	337
3.4	Pre-implementation Steps	118
3.5	Notification of Certain Events	118
3.6	Termination for Non-satisfaction of Conditions	118
4.	The Share Scheme	118
4.1	Overview	118
4.2	Share Scheme Consideration	118
4.3	Special Distribution	118
5.	The Option Scheme	119
5.1	Overview	119
5.2	Option Scheme Consideration	119
5.3	Conditions	779
5.4	Share Scheme and Special Distribution
	Not Conditional on Option Scheme	119
6.	Steps for implementation	119
6.1	l'arget's Obligations for the Transaction	779
6.2	CSE's obligations for the Schemes	121
6.3	Appeal Process	322
6.4	Target Board Recommendation	122 323
6.5	Board Changes
7. $\overline{7.1}$	Representations and Warranties	123 323
$7.\overline{2}$	Target's Representations	123
7.3	CSL's Representations Timing of Representations	324
7.4	Reliance by Parties	324
7.5	Servival of Representations	324
8.	Confidentiality	324
8.1	Target's Obligations	324
$8.\overline{2}$	CSE's Obligations	125
8.3	Takeover Bid	125
9.	Pablic Asnouncemests	125
9.1	Asnouncement and Recommendation	125
$\overline{9.2}$	Public Announcements	$\overline{325}$
9.3	Regaired Disclosure	326

9.4	Statements on Termination	126
10.	GST	126
10.3	Definitions	126
10.2	GST to be Added to Amounts Payable	126
10.3	Liability Net of GST	126
10.4	Cost Exclusive of GST	126
10.5	GST Obligations to Survive Termination	126
$\overline{11}$ .	Termination	126
11.3	Termination	126
$11.\overline{2}$	Notice of Breach	127
11.3	Effect of Termination	127
$\overline{12}$ .	Miscellaneous	127
12.3	Notices	127
12.2	No Waiver	128
12.3	Remedies Cumulative	128
12.4	Entire Agreement	128
12.5	Amendment.	128
12.6	Assignment	128
12.7	No Merger	128
12.8	Further Assurances	128
12.9	Costs and Stamp Duty	128
12.30	Severability of Provisions	128
12.33	Governing Law and Jurisdiction	128
	12.12 Counterparts	128
Schedale 3		129
Timetable		129
Schedule 2		129
	Listed Material Contracts	129
Schedale 3		129
	Material Contracts	129
Schedale 4		129
Patents		129
Schedale 5		129
	Option Scheme Consideration	129
Schedale 6		129
	Form of Special Distribution Resolution	129
Schedale 7		129
	Form of Joint Announcement	129
	Form of John American Asnexure A – Share Scheme Asnexure B – Option Scheme	$\overline{130}$
		130
	Annexure C - Deed Poll	130

Date: 17 July 2006

Parties

1. CSL Limited (ABN 99 051 588 348) of 45 Poplar Road, Parkville, Victoria (CSL);
1. Zenyth Therapeutics Limited (ABN 37 006 634 375) of 576 Swan Street, Richmond, Victoria (Target).

Recitals

A CSL and Target have agreed to combine by means of a scheme of arrangement under Part 5.1 of the Corporations. Act involving Target and its shareholders, parsuant to which CSL Acquirer will acquire all of the ordinary shares in Target.
B CSL and Target have agreed in good faith to implement the Schemes upon and subject to the terms and conditions of this Deed
C CSL and Target have agreed certain other matters in connection with the Transaction as set out in this Deed.

It is agreed as follows.

1. Definitions and Interpretation

1.1 Definitions

The following definitions apply unless the context requires otherwise.

Advisers means, in relation to an entity, its legal, financial and other expert advisers (not including the Independent Expert).

ASIC means the Australian Securities and investments Commission.

ASX means Australian Stock Exchange Limited (ABN 98 008 624 691).

ASX Listing Rules means the official listing rules of ASX.

Avexa Share means a fully paid ordinary share in the capital of Avexa Limited (ABN 53 108 150 750).

Business Day has the meaning given in the ASX Listing Rules.

Category 1 Listed Material Contract means the agreement referred to in Category 1 of Schedule 2.

Category 2 Proposal means any offer made in writing to Target by any counterparty to either of the Listed Material Contracts set out in Category 2 of Schedule 2 to vary the terms of either of those contracts.

Claim means, is relation to a person, a demand, claim, action or proceeding made or broaght by or against the person, however arising and whether present, unascertained, immediate, future or contingent.

Conditions means the conditions set out in clause 3.1.

Confidentiality Agreement means the agreement dated 30 January 2006 and made between CSL and Target.

Corporations Act means the Corporations Act 2001 (Cth).

Court means the Supreme Court of Victoria or any other court. of competent jarisdiction under the Corporations Act determined by Target.

CSL Acquirer means one or more Related Entities of CSL nominated by CSE prior to the First Coart Date for the purpose of acquiring the Scheme Shares.

CSL Confidential Information means any commercial or technical information of CSL or any Related Entity of CSL disclosed or supplied by or on behalf of any such entity to Target or any of its Representatives, whether orally or visually or in documentary or electronic form and including the notes, records or copies made by Target or any of its Representatives of such information, but excluding information which is in the public domain (other than as a result of a breach of this Deed by Target).

CSL Information means such information regarding CSL and its Related Entities provided by or on behalf of CSL to Target. or the Independent Expert to enable the Explanatory Booklet. to be prepared and completed.

Deed Poll means the deed poll referred to in clause 6.2(g).

Due Diligence Investigations means the due diligence investigations carried out by CSL and its Representatives prior to the date of this Deed for the parposes of considering and evaluating the Transaction.

Effective means, when used in relation to a Scheme, the coming into effect, pursuant to section 411(10) of the Corporations Act, of the order of the Court made for the purposes of section. 411(4)(b) in relation to the Scheme.

Effective Date means, when used in relation to a Scheme, the date on which the order of the Court made for the purposes. of section 411(4)(b) of the Corporations Act in relation to the Scheme comes into effect pursuant to section 411(10) of the Corporations Act.

Section 15 - Merger Implementation Deed and Deed Poll continued

Excluded Share means any Target Share held by any person on behalf of or for the benefit of CSL or any of its Related Entities.

Explanatory Booklet means the information memorandum to be prepared by Target and dispatched to Target Shareholders and Target Optionholders in respect of the Transaction.

General Meeting means a general meeting of Target Shareholders to consider and, if thought fit, pass the Special Distribution Resolution.

Implementation means implementation of a Scheme (if it becomes Effective) and the Special Distribution.

Implementation Date means, in relation to the Transaction, the third Basiness Day after the Record Date for the Share Scheme or such other date as CSL and Target agree in writing.

Independent Expert means the firm engaged by Target to prepare the independent expert's report in relation to the Transaction for inclusion in the Explanatory Booklet.

Listed Material Contract means any contract, arrangement or understanding referred to in Schedule 2.

Material Contract means:

(a) the contracts listed in Schedule 3; and
(b) any contract, arrangement or understanding to which Target or any Related Entity of Target is a party that requires or otherwise may reasonably be expected to result in expenditure. by Target (either alone or together with any Related Entity) of Target) of \$200,000 or more in any year,

and includes, without limitation, the Listed Material Contracts.

Officer means, in relation to an entity, its directors, officers and employees.

Option Scheme means the proposed scheme of arrangement between Target and Optionholders, as described in clause 5.1. sobject to any alterations or coaditions made or required by the Court under section 411(6) of the Corporations Act and approved in writing by each party.

Option Scheme Consideration means the consideration to be provided to the Optionholders for cancellation of each Scheme. Option under the terms of the Option Scheme and as set out in Schedule 5.

Optionholders means the holders of Target Options.

Patents means the patents listed in Schedale 4.

PS 60 means Policy Statement 60 issued by ASIC on 4 August 1999.

PS 142 means Policy Statement 142 issued by ASIC on 4 Aaqust 1999.

Record Date means, in relation to the Option Scheme, 5.00pm on the third Business Day after the Effective Date for the Option. Scheme, and in relation to the Share Scheme and the Special Distribution, 5.00pm on the fifth Business Day after the Effective Date for the Share Scheme or (in each case) such other time or date as CSL and Target agree in writing.

Requiatory Authority means a government or a governmental, semi-covernmental or iadicial entity or audiodity or any Minister. department, office or delegate of any government. It includes a self-regalatory organisation established under statute or a stock exchange, ASIC, ASX and the Treasurer of the Commonwealth. of Australia.

Related Entity means, in relation to a party, any entity which is related to that party within the meaning of section 50 of the Corporations Act.

Representative means, in relation to an entity:

(a) each of the entity's Related Entities; and
(b) each of the Officers and Advisers of the entity or of any of its Related Entities.

Scheme Meetings means the meetings to be ordered by the Court to be conversed pursuant to section 413(1) of the Corporations Act in respect of the Schemes.

Scheme Optionholder means each person who is registered in the register of optionholders of Target as a holder of Scheme. Options as at the Record Date for the Option Scheme.

Scheme Options means the Options on issue as at the Record Date.

Scheme Quit Date means four months after the date of this Deed or such later date as CSL and Target agree in writing.

Scheme Shareholder means each person registered in the Target Share Register as the holder of Scheme Shares as at the Record Date.

Scheme Shares means all of the Target Shares on issue at the Record Date other than the Excluded Shares (if any).

Schemes means the Share Scheme and the Option Scheme.

Second Court Date means the fast day on which an application made to the Court for an order approving a Scheme pursuant to section 413(4)(b) of the Corporations Act is heard or, if the application is adjourned for any reason, the first day on which the adjourned application is heard.

Share Scheme means the proposed scheme of arrangement between Target and Target Shareholders, as described in clause 4, subject to any alterations or conditions made or required by the Court under section 411(6) of the Corporations Act and approved in writing by each party.

Share Scheme Consideration means the consideration to be provided to Scheme Shareholders under the terms of the Share Scheme, as described in clause 4.2.

Special Distribution means the proposed distribution to be made by Target to Scheme Shareholders of all of the Avexa Shares held by Target as at the Implementation Date, generally in accordance with clause 4.3 and as more specifically provided for in the Share Scheme.

Special Distribution Resolution means a general resolution substantially in the form of Schedule 6 to approve the Special Distribution

Target Board means the board of directors of Target.

Target Confidential Information means any commercial or technical information of Target or any Related Entity of Target disclosed or supplied by or on behalf of any such entity to CSL or any of its Representatives, whether orally or visually or in documentary or electronic form and including the notes, records or copies made by CSL or any of its Representatives of such information and any information provided to CSL parsuant to clause 8.2, but excluding information which is in the public domain (other than as a result of a breach of this Deed by CSL).

Target Group means Target and its Related Entities.

Target Information means all information contained in the Explanatory Booklet but does not include the CSL Information. and the independent expert's report prepared by the Independent. Expert and included in or accompanying the Explanatory Booklet.

Target Material Adverse Change means:

(a) a matter, event or circumstance which occurs, is announced or becomes known to CSL (whether or not it becomes pablic). where that matter, event or circumstance either individually or when aggregated with all other matters, events or circumstances. has diminished or is reasonably likely to diminish the netassets of the Target Groap by \$2.5 million or more;
(b) the initiation of any Claim for the purpose of revoking any of the Patents or of otherwise substantially depriving Target or any of its Related Entities of the commercial benefit of any of the Patents, provided that:
(i) the Claim is not initiated or instigated by or on behalf of CSL or any of its Representatives;
(ii) the Claim is not frivolous or vexatious; and
(iii) Target receives legal advice from a Queens Counsel or Senior Counsel acceptable to CSL acting reasonably within 15 Basiness Days of Target being served with notice of the relevant Claim that the Claim has a reasonable prospect of success, but aothing in this sub-paragraph (iii) requires Target to seek that legal advice and if Target elects not to do so, this sub-paragraph (iii) will be satisfied; or
(c) the termination or amendment of any of the Listed Material Contracts in a manner that has or would have a material. adverse effect on the business, assets, liabilities, financial or trading position or prospects of the Target Group taken. as a whole.
but excludes:
(d) any matter, event or circumstance resulting from the adoption by Target of International Financial Reporting Standards;
(e) any matter, event or circumstance required to be done or procured by Target pursuant to this Deed, the Schemesor the Special Distribution:
(f) any matter, event or circumstance which is known to CSL prior to the date of this Deed (which does not include knowledge) of the risk of a matter, event or circumstance happening);
(q) any matter, event or circumstance that was fully and fairly disclosed to CSL or its Representatives from:
(i) documents made available to them by Target in the coarse of their Due Diligence Investigations; or
(ii) responses provided to them in interviews with Target's senior management or with the management of Target's project partners, such interviews forming part of the Due. Diligence Investigations;

Section 15 - Merger Implementation Deed and Deed Poll continued

(h) any matter, event or circumstance that was apparent or reasonably ascertainable by CSL or its Representatives from:
6) announcements made by Target to ASX prior to the date of this Deed: or
{ii) information that was otherwise disclosed in public filiags. with Regulatory Authorities in Australia by Target or any of its Related Entities prior to the date of this Deed;
the diminution of value of Target's investment in Avexa due to fluctuations in the share price of Avexa Shares trading on ASX: or
(i) any expenditure daly and properly incurred by Target in accordance with its research and development budget for the financial year 2006/2007 as disclosed to CSL in writing prior to the date of this Deed.

Target Material Corporate Transaction means, other than with the express written consent of CSL, as required or contemplated by the Schemes or the Special Distribution, or as expressly excluded in this Deed:

(a) Target or any Related Entity of Target making or declaring any distribution whether by way of dividend or capital reduction or otherwise and whether in cash or in specie;
(b) except for any proposed transaction pablicly announced by Target before the date of this Deed or otherwise disclosed. to CSL or any of its Representatives prior to the execution. of this Deed, after the date of this Deed:
(i) Target or any Related Entity of Target acquiring, offering to acquire or agreeing to acquire one or more companies, businesses or assets for any interest in one or more companies, businesses or assets) for an amount in aggregate greater than \$200,000, or making an announcement in relation to such an acquisition. offer or agreement;
(ii) Target or any Related Entity of Target leasing, sub-leasing or disposing of, offering to lease or sub-lease or dispose. of or agreeing to lease, sub-lease or dispose of one or more companies, businesses or assets (or any interest. in one or more companies, businesses or assets) for an amount, or in respect of which the book value (as recorded in Target's statement of financial position as at 30 June 2005) is, in aggregate greater than \$200,000, or, in the case of a lease or sub-lease to another person, for a period exceeding 12 months, or making an announcement in relation to such a lease, sub-lease, disposition, offer or agreement;
(iii) Target or any Related Entity of Target entering into, or offering to enter into or agreeing to enter into, any agreement, lease or sub-lease, joint venture or partnership involving a commitment of greater than 12 months or which would require expenditure, or the foregoing of revenue, by the Target Group of an amount which is, in aggregate, more than \$200,000 per annum or which would bring the aggregate new capital expenditure. commitments of the Target Group since the date of this Deed to more than \$200,000 or making an announcement. in relation to such an entry, offer or agreement; or
(iv) Target or any Related Entity of Target making any loans, advances or capital contributions to, or investments in, any other person, other than to or in Target or any wholly-owned Related Entity of Target; or
(v) Target or any Related Entity of Target iscurring any indebtedness or issuing any indebtedness or debt securities greater than \$200,000, other than advances under existing facilities in existence as at the date of this Deed or other than in the ordinary and usual course of basiness.

or the business of the Target Group not otherwise being carried on in the ordinary and usual coarse of basiness;

(c) Target or any Related Entity of Target:
(i) changing the terms of any Listed Material Contract;
(ii) paying, discharging or satisfying any claims, liabilities or obligations under any Listed Material Contract other than any payment, discharge or satisfaction, in accordance with the terms of the contract; or
(iii) waiving any claims or rights under or waiving the benefit of any provisions of any Listed Material Contract; or
(iv) other than in the usual and ordinary course of basiness:
- (A) changing the terms of any Material Contract (other than a Listed Material Contract):
- (B) paying, discharging or satisfying any claims, fiabilities or obligations under any Material Contract (other than a Listed Material Contract) other than any payment, discharge or satisfaction, in accordance with the terms of the contract; or
- (C) waiving any material claims or material rights ander or waiving the benefit of any material provisions of any Material Contract (other than a Eisted Material Contract).

where the consequences of such action are material to Target or the relevant Related Entity of Target;

(d) Target or any Related Entity of Target disposing of shares in a Related Entity of Target:
(e) the constitution of Target or a Related Entity of Target being amended: or
(f) the trustee of any trust in which Target or any Related Entity of Target has an interest of more than 50% (other than any security trust arrangement of which Target or any Related Entity of Target is an actual or potential beneficiary) undertaking an action in respect of that trust if the corresponding action, in the case of Target and its Related Entities, would constitute a Tarcet Material Corporate Transaction.

For the avoidance of doubt, Target Material Corporate Transaction does not include the issue of Target Options where the issue and terms of the Target Options were approved by Target Board, and notified in writing to CSL, prior to the date of this Deed.

Target Option Plan means Target's Key Employee Share Option Pian.

Target Options means the options over unissued Target Shares granted in accordance with the terms and conditions of the Target Option Plan or otherwise granted by Target to Target executive directors and Target former executive directors in accordance with option incentive plans approved by Target. Shareholders in general meeting.

Target Prescribed Occurrence means, other than:

(a) as required or contemplated by this Deed;
(b) as required or contemplated by the Schemes or the Special Distribution; or
(c) with the express written consent of CSL,
the occurrence of any of the following:
(d) Target or any Related Entity of Target converting all or any of its shares into a larger or smaller number of shares;
(e) Target or any Related Eatity of Target resolving to reduce its share capital in any way;
(f) Target or any Related Entity of Target:
(i) entering into a buy-back agreement; or
(ii) resolving to approve the terms of a buy-back agreement under the Corporations Act;
(g) Target or any Related Eatify of Target making an allotment or issue of, or granting an option to subscribe for, any shares or securities convertible into shares, or agreeing to make such an allotment or issue or to grant such an option, other than:
(i) any new Target Shares issued pursuant to the exercise (in accordance with their terms) of Target Options prior to the date of this Deed; or
(ii) any Target Options issued prior to the Effective Date, the issue and terms of which were approved by Target Board, and potified in writing to CSL, prior to the date of this Deed;
(h) Target or any Related Entity of Target issuing, or agreeing to issue, convertible notes, other debentures or ansecared. nates:
(i) Target or any Related Entity of Target disposing, or agreeing to dispose, of the whole, or a substantial part, of its basiness. or property;
Target or any Related Entity of Target creating, or agreeing to 筍。 create, any mortgage, charge, lien or other encumbrance or other third party interests over the whole, or a substantial part, of its business or property;
(k) Target or any Related Entity of Target resolving that it be wound up:
{i) a liquidator, provisional liquidator or administrator of Target. or of any Related Entity of Target being appointed;
(m) the making of an order by a court for the winding up of Target or of any Related Entity of Target;
(n) Target or any Related Entity of Target executing a deed of company arrangement;
(c) a receiver, or a receiver and manager, in relation to the whole, or a part, of the property of Target or of any Related Entity of Target being appointed; or
(p) the trustee of any trust in which Target or any Related Entity of Target has an interest of more than 50% (other than any security trust arrangement of which Target or any Related Entity of Target is an actual or potential beneficiary) undertaking an action in respect of that trast if the corresponding action, in the case of Target and its Related Entities, would constitute a Target Prescribed Occarrence.

Target Share means a fully paid ordinary share in the capital of Target.

Target Share Register means the register of members of Target. maintained in accordance with the Corporations Act.

Target Shareholder means each person registered in the Target Share Register as the holder of Target Shares.

Third Party Proposal means:

(a) any expression of interest, proposal or offer by any person-(other than CSL or any of its Related Entities) made in writing to Target to evaluate or enter into any transaction which is

Section 15 - Merger Implementation Deed and Deed Poll continued

similar to the Transaction (whether a scheme of arrangement, a takeover bid or otherwise) or ander which other than as required or contemplated by the Schemes:

6) that person (together with its associates) may acquire a relevant interest in all or a substantial part of the Tarcet Shares or the issued shares of any Related Entity of Target;
(ii) that person may acquire, directly or indirectly (including by way of joint venture, daal listed company structure, strategic alliance or otherwise), any interest in all or a substantial part of the business or assets of the Target or the Target Grosp; or
(iii) that person may otherwise acquire control of or merge or amalgamate with Target or any Related Entity of Target; or
(b) a Category 2 Proposal.

Timetable means the timetable set out in Schedule 1, or such other timetable as may be agreed in writing by the parties.

Transaction means the proposed acquisition by CSL Acquirer in accordance with the terms of this Deed of all of the Target Shares. through the implementation of the Share Scheme, the proposed cancellation of the Scheme Options through the implementation of the Option Scheme and the proposed distribution in specie of the Avexa Shares through the implementation of the Special Distribution.

1.2 Interpretation

Headings are for convenience only and do not affect interpretation. The following reles apply unless the context regaires otherwise.

(a) The singalar includes the plural and conversely.
(b) A gender includes all genders.
(c) If a word or phrase is defined, its other grammatical forms have a corresponding meaning.
(d) A reference to a person, corporation, trast, partnership, anincorporated body or other entity includes any of them.
(e) A reference to a clause, schedule or annexure is a reference to a clause of, or schedule or annexure to, this Deed,
(f) A reference to an agreement or document (including a reference to this Deed) is to the agreement or document as amended, varied, supplemented, novated or replaced, except to the extent prohibited by this Deed or that other agreement or document.
(c) A reference to a person includes a reference to the person's executors, administrators, successors, substitutes (including persons taking by novation) and assigns.
(h) A reference to legislation or to a provision of legislation includes. a modification or re-enactment of it, a legislative provision substituted for it and a regulation or statutory instrument. issued under it.
(i) A reference to \$ is to the lawful currency of Australia.
Words and phrases not specifically defined in this Deed have 仰。 the same meanings (if any) given to them in the Corporations Act.
(k) A reference to time is a reference to time in Melbourne. Aristralia
(i) If the day on which any act, matter or thing is to be done is a day other than a Business Day, such act, matter or thing must be done on the immediately succeeding Basiness Day.
(m) The meaning of general words is not limited by specific examples introduced by including, or for example, or similar expressions.
(n) A reference to a party using its reasonable endeavours does not include a reference to that party paying money (except immaterial amounts payable to Advisers and similar expenses) or providing other valuable consideration to or for the benefit of any person (and an obligation on a party to use its reasonable endeavours does not oblige that party to pay money (except immaterial amounts payable to Advisers and similar expenses) or provide other valuable consideration to or for the benefit of any person).

2. Implementation of the Schemes

Target agrees to propose, and the parties agree to implement, the Schemes upon and subject to the terms and conditions of this Deed.

3. Conditions

3.1 Conditions

Subject to this clause 3, certain obligations of the parties under this Deed relation to the Schemes are subject to the conditions. in this clause 3.1 having been satisfied or waived in accordance with clause 3.2, to the extent and in the manner set out in that clause

(a) (No prohibitions) No temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or the Takeovers Panel or other legal restraint or prohibition is in effect at 8.00am on the Second-Court Date which prevents the consummation of any aspect of the Schemes.

(b) (No Target Material Corporate Transaction) Between the date of this Deed and 8.00am on the Second Court Date, no Target Material Corporate Transaction occurs.
(c) (No Target Prescribed Occurrence) Between the date of this Deed and 8.00am on the Second Court Date, no Target Prescribed Occarrence accars.
(d) (No Target Material Adverse Change) Between the date of this Deed and 8.00am on the Second Court Date, no Target Material Adverse Change occurs.
(e) (Target representations and warranties) The representations and warranties of Target set out in clause 7.1 of this Deed. that are qualified as to materiality are true and correct, and the representations and warranties of Target set out in this Deed that are not so qualified are true and correct in all material respects, in each case as at the date of this Deed. and as at 8.00am on the Secord Court Date as though made. on and as of that time, except to the extent that any such representation or warranty expressly relates to an earlier date (in which case as of such date).
(f) (CSL representations and warranties) The representations and warranties of CSL set out in clause 7.2 of this Deed that are qualified as to materiality are true and correct, and the representations and warranties of CSL set out in this Deed that are not so qualified are true and correct in all material respects, in each case as at the date of this Deed and as at 8.00am on the Second Coart Date as though made on and as of that time, except to the extent that any suchrepresentation or warranty expressly relates to an earlier date (in which case as of such date).
(g) (Category 1 Listed Material Contract) Before 8.00am on the Second Court Date, consent being obtained from the counterparties to the novation or assignment of the benefit and the burden of the Category 1 Listed Material Contract, to CSL or a Related Entity of CSL nominated by CSL.
(h) (Shareholder approval of Share Scheme) the Share Scheme is approved at the Scheme Meeting by Target Shareholders by the majorities required under section 411(4)(a)(ii) of the Corporations Act.
(i) (Court approval of Share Scheme) the Share Scheme is approved by the Court in accordance with section 411(4)(b) of the Corporations Act.
备。 (Independent Expert) the Independent Expert giving a report to Target that in its opinion the Share Scheme and the Special Distribution are in the best interests of Target Shareholders and the Independent Expert maintaining that opinion up to 8.00am on the Second Court Date.

3.2 Benefit and Waiver of Conditions

(a) Target and CSL together have the benefit of the Conditions in clauses $3.1(a)$ , $3.1(b)$ , $3.1(b)$ and $3.1(b)$ and any breach or non-fuffilment of those Conditions can only be waived with the consent of both parties.
(b) CSL alone has the benefit of the Conditions in clauses 3.1(b). 3.1(c), 3.1(d), 3.1(e) and 3.1(c) and any breach or non-fulfilment. of those Conditions may be relied upon only by CSL which may at any time and from time to time waive the breach or non-fuifilment.
(c) Target alone has the benefit of the Condition in clause 3.1(t), and any breach or non-fulfilment of that Condition may be relied upon only by Target which may at any time and from time to time waive the breach or non-fulfilment.
(d) A party estitled to waive a Condition usder this clause 3.2 may do so in its absolute discretion.
(e) If a waiver by a party of a Condition is itself conditional and the other party accepts the condition, the terms of that condition apply accordingly. If the other party does not accept a conditional waiver of the Condition, the Condition has not been waived.
(f) If a party waives the breach or non-fulfilment of any of the Conditions, that waiver will not preclude it from suing the other party for any breach of this Deed, including a breach that resulted in the non-fulliment of the Condition that was waived.
(g) Unless specified in the waiver, a waiver of the breach or non-fuifilment of any Condition will not constitute:
(i) a waiver of breach or non-fulfilment of any other Condition. resoland from events or diroumstances diving rise to the breach or non-fulfiment of the first Condition: or
(ii) a waiver of breach or non-fulfilment of that Condition resulting from any other event or circumstance.

3.3 Reasonable Endeavours

Each of Target and CSL must use its reasonable endeavours. to procare that:

(a) each of the Conditions is satisfied as soon as practicable after the date of this Deed, or continues to be satisfied at all times antil the last time it is to be satisfied (as the case may require), with a view to the Effective Date for the Schemes occurring on or before the Scherne Quit Date; and
(b) there is no event or circumstance that would prevent the Conditions being satisfied.

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3.4 Pre-implementation Steps

Without limiting the generality of clause 3.3:

(a) (Target Material Corporate Transaction) Target must ensure that no Target Material Corporate Transaction occars between the date of this Deed and 8.00am on the Second Court Date: and
(b) (Target Prescribed Occurrence) Target must easure that ao Target Prescribed Occurrence occurs between the date of this Deed and 8.00am on the Second Coart Date.

3.5 Notification of Certain Events

Each party must:

(a) keep the other promptly and reasonably informed of the steps it has taken and of its progress towards satisfaction of the Conditions;
(b) promptly notify the other if it becomes aware that any Condition has been satisfied;
(c) promptly notify the other if it becomes aware that any Condition has failed to be satisfied or has become incapable of being satisfied or is not reasonably capable of being satisfied (having regard to the obligations of the parties ander clause 3.3; and
(d) after having given or received a notice in accordance with clause 3.5(c) in relation to a Condition that it is entitled under clause 3.2 to waive, give notice to the other party as soon. as possible (and in any event no later than five Business Days or such shorter time to ensure that notice is given before 5.00pm on the day before the Second Court Date). as to whether or not it waives the breach or non-falfilment. of the relevant Condition, specifying that Condition.

3.6 Termination for Non-satisfaction of Conditions

Subject to clause 13.3 and without limiting the parties' termination. rights under clause 11:

(a) CSE may terminate this Deed by giving notice to Target if any of the Conditions in clauses 3.1(b), 3.1(c), 3.3(d), 3.1(e) and 3.1(g) has failed to be satisfied, has become incapable of being satisfied or is not reasonably capable of being satisfied (having regard to the obligations of the parties under clause 3.3) and to the extent that such Condition may be waived by CSE, has not previously been waived by CSL;
(b) Target may terminate this Deed by giving notice to CSL if the Condition in clause 3.1(f) has failed to be satisfied, has become incapable of being satisfied or is not reasonably. capable of being satisfied (having regard to the obligations of the parties under clause 3.3), and to the extent that such Condition may be waived by Target, has not previously been waived by Target; and

(c) either party may terminate this Deed by giving the other notice. if any of the Conditions in clauses 3.1(a), 3.3(h), 3.3(i) and 3.1@ has failed to be satisfied, has become incapable of being satisfied or is not reasonably capable of being satisfied (having regard to the obligations of the parties under clause 3.3 and has not previously been waived by the parties.

4. The Share Scheme

4.1 Overview

Target must propose a scheme of arrangement under Part 5.1 of the Corporations Act between it and the Target Shareholders sebstantially in the form set out in annexure A or such other form as the parties agree in writing, ander which, subject to the Share-Scheme becoming Effective, all of the Scheme Shares will be transferred to CSL Acquirer and the Scheme Shareholders will be entitled to receive, for each Scherne Share held at the Record Date, the Scheme Consideration and the Special Distribution (subject to approval by Target Shareholders of the Special Distribution Resolution).

4.2 Share Scheme Consideration

CSL covenants in favour of Target, in consideration for the transfer to CSE Acquirer of the Scheme Shares held by each Scheme. Shareholder under the terms of the Share Scherne, to provide or to procure that CSL Acquirer provides to each Scheme Shareholder the Scheme Consideration being a cash amount per Scheme Share of \$0.82.

4.3 Special Distribution

Target agrees and CSL acknowledges that the Share Scheme will be proposed on the basis that:

(a) Target will convene the General Meeting so that it is held as soon as practicable after the conclusion or adjournment of the Scheme Meeting;
(b) if the Special Distribution Resolution is duly passed at the General Meeting and if the Share Scheme becomes Effective:
(i) the record date for the Special Distribution will be the same date as the Record Date for the Share Scheme; and
(ii) the Special Distribution will be provided to Scheme Sharebolders in accordance with the Share Scheme: and
(c) for the avoidance of doubt, if the Special Distribution Resolution is not duly passed at the General Meeting, the Share Scherne will proceed (if it becomes Effective).

5. The Option Scheme

5.1 Overview

Target must propose a scheme of arrangement under Part 5.3 of the Corporations Act between it and the Scheme Optionholders. substantially in the form set out in annexure C or such other form. as the parties agree in writing, under which, subject to the Option Scheme becoming Effective, all of the Options will be cancelled and the Optionholders will be entitled to receive, for each Scherne Option held at the Record Date, the Option Scherne Consideration.

5.2 Option Scheme Consideration

Target covenants in favour of CSL, in consideration for the cancellation of a Scheme Option held by a Scheme Optionholder ander the terms of the Option Scheme, to provide to each Scheme Optionholder the Option Scheme Consideration.

5.3 Conditions

The Option Scheme is subject to and conditional apon:

(a) the Share Scheme becoming Effective; and
(b) the grant of an ASX waiver from any requirement to obtain approval of Target Shareholders under ASX Listing Rule 6.23 for the cancellation of the Options, or failing grant of the waiver, approval by Target Shareholders in general meeting. of the cancellation of the Options.

5.4 Share Scheme and Special Distribution not Conditional on Option Scheme

For the avoidance of doubt, if the Option Scheme does not become Effective:

(a) the Share Scheme will proceed if it becomes Effective; and
(b) the Special Distribution will proceed if Target Shareholders approve the Special Distribution Resolution.

6. Steps for Implementation

6.1 Target's Obligations for the Transaction

Target must use reasonable endeavours to execute all documents and do all acts and things within its power as may be necessary. or desirable for the implementation and performance of the Traasaction (including taking reasonable measures aimed at encouraging a high level of participation by Target Shareholders. and Optionholders at the Scherne Meetiags and the General Meeting and ensuring a fall awareness of the Target Board's recommendations in respect of those meetings) substantially in accordance with the Timetable, and in particular Target mast:

(a) (prepare Explanatory Booklet) as soon as practicable after the date of this Deed, prepare the Explanatory Booklet in compliance with all applicable laws, and in particular the Corporations Act, PS 60, PS 142 and the ASX Listing Rules (and including a summary of the process by which Target Shareholders and Optionholders may object to the Schemes at the Coart hearing on the Second Court Date). Without limiting the generality of the foregoing, the Explanatory Booklet will comprise:
(i) the terms of the Schemes;
(ii) a notice of the Scheme Meetings, a notice of General Meeting and any other notice of meeting in respect of any other resolution that is necessary, expedient or incidental to give effect to the Share Scheme, the Option Scheme and the Special Distribution, together with a proxy formfor the Scheme Meetiags, the General Meeting and for any ancillary meeting;
(iii) an explanatory statement in relation to the Schemes. issued parsuant to section 412 of the Corporations Act. and registered with ASIC;
(iv) an explanatory statement in relation to the Special Distribution issued parsuant to section 256C(4) of the Corporations Act (which explanatory statement may be subsemed within the explanatory statement for the Schemes):
(v) for the purpose of the explanatory statements referred to in sub-paragraphs (iii) and (iv), the CSL Information;
(v) a copy of the report of the independent Expert stating whether, in the opision of the independent Expert, the Share Scheme and the Special Distribution are in the best interests of Target Shareholders;
(vii) a copy of this Deed (without schedules or annexares). or a summary of this Deed; and

(viii) a copy of the executed Deed Poll;

(b) (provide drafts to CSL) make available to CSL drafts of the Explanatory Booklet (excluding drafts of the independent, Expert's report), consult with CSL in relation to the content of those drafts (other than the CSL information), and consider in good faith, for the purpose of amending those drafts, comments from CSL and its Representatives on those drafts;
(c) (Independent Expert) promptly appoint the Independent Expert and provide all assistance and information reasonably requested by the Independent Expert in connection with the preparation of the independent expert's report for inclusion inthe Explanatory Booklet;

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(d) (approval of draft for ASIC) as soon as practicable after the preparation of an advanced draft of the Explanatory Booklet suitable for review by ASIC, procare that a meeting of the Target Board, or of a committee of the Target Board appointed for the purpose, is conversed to consider approving that draft as being in a form appropriate for provision to ASIC for review:
(e) {liaison with ASIC} as soon as practicable after the date of this Deed, provide an advanced draft of the Explanatory Booklet, in a form approved in accordance with clauses 6.1(d) and 6.2(d), to ASIC for its review and approval for the purposes of section 411(2) of the Corporations Act, and:
liaise with ASIC during the period of its consideration of that draft of the Explanatory Booklet; and
(ii) keep CSL informed of any matters raised by ASIC in relation to the Explanatory Booklet, and use all reasonable endeavours in cooperation with CSL to resolve any such matters;
(f) (approval of Explanatory Booklet) as soon as practicable after the conclusion of the review by ASIC of the Explanatory Booklet, procure that a meeting of the Target Board, or of a committee of the Target Board appointed for the purpose, is convened to consider approving the Explanatory Booklet for dispatch to the Target Shareholders, subject to approval of the Court:
(c) {section 411(17)(b) statements) apply to ASIC for the production of statements in writing pursuant to section 413(17)(b) of the Corporations Act stating that ASIC has no objection to the Schemes:
(h) (Scheme Meetings) promptly after, and provided that, the approvals in clauses 6.1(!) and 6.2(e) have been received:
(i) apply to the Court for orders ander section 433(3) of the Corporations Act directing Target to convene the Scheme Meetings; and
(ii) take all reasonable steps necessary to comply with the orders of the Court including, as required, dispatching the Explanatory Booklet to the Target Shareholders and convening and holding the Scheme Meetings;
(i) (General Meeting) take all reasonable steps necessary to convene the General Meeting, in accordance with Target's constitution and the Corporations Act, so that the General Meeting is held as soon as practicable after the conclusion or adjournment of the Scheme Meetings;
(i) (Court documents) coasult with CSL in relation to the content of the documents required for the purpose of each of the Court hearings held for the purposes of sections 411(1) and

411(4)(b) of the Corporations Act in relation to the Schemes (including originating process, affidavits, submissions and draft minutes of Court orders) and consider in good faith, for the purpose of amending drafts of those documents, comments from CSL and its Representatives on those documents;

(k) (registration of explanatory statement) request ASIC to register the explanatory statement included in the Explanatory Booklet in relation to the Schemes in accordance with section 412(6) of the Corporations Act;
併. (approval and implementation of the Share Scheme) if the resolution submitted to the Scheme Meeting in relation to the Share Scheme is passed by the necessary majorities, apply (and, to the extent necessary, re-apply) to the Court for orders approving the Share Scheme substantially in accordance with the Timetable, and if that approval is obtained:
promptly lodge with ASIC an office copy of the orders 员。 approving the Share Scheme in accordance with section 411(10) of the Corporations Act;
(ii) close the Target Share Register as at the Record Date and determine entitlements to the Share Scheme Consideration in accordance with the Share Scheme;
(iii) execute proper instruments of transfer of and effect and redister the transfer of the Scheme Shares in accordance. with the Share Scheme; and
(iv) do all other things contemplated by or necessary to give effect to the Share Scheme and the orders of the Court. approving the Share Scheme;
(m) (approval and implementation of Special Distribution) if the resolution submitted to the General Meeting in relation to the Special Distribution is passed by the necessary majority, doall other things contemplated by or necessary to give effect. to the Special Distribution including:
份 close the Target Share Register as at the Record Date and determine entitlements to the Special Distribution in accordance with the Share Scheme:
(ii) execute proper instruments of transfer of and effect and register the transfer of the Avexa Shares to Scheme Shareholders in accordance with the Share Scheme;
fiil orocure that Avexa issue holding statements to Scheme Shareholders in relation to their entitlement to Avexa Shares; and
(iv) Todge with ASX, AS(C and Avexa all notices required under the Corporations Act in relation to the Special Distribution.
(n) (approval and implementation of Option Scheme) if the resolution submitted to the Scheme Meeting in relation to the Option Scheme is passed by the necessary majorities, apply (and, to the extent necessary, re-apply) to the Coart for orders approving the Option Scheme substantially in accordance. with the Timetable, and if that approval is obtained:
(i) promptly lodge with ASIC an office copy of the orders approving the Option Scheme in accordance with section 411(10) of the Corporations Act;
(iii) close the register of Scheme Optionholders as at the Record Date and determine entitlements to the Option Scheme Consideration in accordance with the Option Scheme:
(iii) effect the cancellation of the Scheme Options in accordance with the Option Scheme; and
(iv) do all other thisgs contemplated by or necessary to give effect to the Option Scheme and the orders of the Court approving the Option Scheme;
(c) (conduct of business) during the period from the date of this Deed to the Implementation Date, conduct (and cause each) of its Related Entities to coaduct) its respective business and operations in the ordinary and usual course substantially consistent (subject to any applicable laws, requlations and licence conditions) with the manner in which each such business and operations have been conducted in the period 12 months prior to the date of this Deed (including the renewal of insurance policies as and when they fall due). and is compliance in all material respects with all applicable laws, requiations and licence conditions and, to the extent consistent with that obligation, use reasonable efforts to:
(i) preserve intact its carrent business organisation;
(ii) keep available the services of its current Officers; and
(iii) preserve its relationship with Regulatory Authorities, customers, suppliers, licensors, licensees and others having material business dealings with it;
(p) (consultation) during the period from the date of this Deed to the Implementation Date, consult with CSL in relation to the conduct of material aspects of its and its Related Entities' businesses and operations and consider in good faith CSL's views in relation to the same;
(a) (ASX listing) use its reasonable endeavours to ensure that the Target Shares continue to be gapted (even if saspended from trading) on the financial market conducted by ASX until the close of basiness on the implementation Date;
名 (representation) allow, and not oppose, any application by CSL for leave of the Court to be represented, or the separate representation of CSL by counsel, at the Court hearings held for the purposes of sections 411(1) and 431(4)(b) of the Corporations Act in relation to the Schemes; and
(s) (compliance with laws) use its reasonable endeavours to do everything reasonably within its power to ensure that. the Transaction is effected in accordance with all laws and regulations applicable in relation to the Transaction.
(t) (Target Options) take such actions as shall be deemed necessary to ensure that during the period from the date of this Deed to the Effective Date no new shares or options are allotted, issued or granted or agreed to be allotted, issued or granted under the Target Obtion Plan or otherwise. except new Target Shares issued parsuant to the exercise (in accordance with their terms) of Target Options:
(i) issued prior to the date of this Deed; or
(ii) the issue and terms of which were approved by Target Board, and notified in writing to CSL, prior to the date of this Deed:
(u) (ASX waiver/Target Shareholder approval) use all reasonable endeavours to procure that ASX grants a waiver of any requirement under ASX Listing Rule 6.23 to obtain the approval of Target Shareholders for the cancellation of all of the Options parsuant to the Option Scherne, or failing the grant of the waiver, put forward at the General Meeting, a resolution (in a form acceptable to the parties) approving the cancellation of the Options ander the Option Scheme.

6.2 CSL's Obligations for the Schemes

CSL must use reasonable endeavours to execute all documents. and do all acts and things within its power as may be necessary. or desirable for the implementation and performance of the Schemes substantially in accordance with the Timetable, and in particular CSL must:

(a) (CSL Information) promptly prepare and provide to Target the CSL Information for inclusion in the Explanatory Booklet in compliance with all applicable laws relevant to that information, make available to Target drafts of that CSL information. consult with Target in relation to the content of those drafts. and consider in good faith, for the parpose of amending those drafts, comments from Target and its Representatives. on that information:
(b) (independent Expert) promotly provide all assistance and information reasonably requested by the Independent Expert. in connection with the preparation of the independent expert's report for inclusion in the Explanatory Booklet;

Section 15 - Merger Implementation Deed and Deed Poll continued

(c) (review of Explanatory Booklet) as soon as practicable after delivery, review the drafts of the Explanatory Booklet prepared by Target and provide comments on those drafts in good faith:
(d) (approval of draft for ASIC) as soon as practicable after the preparation of an advanced draft of the Explanatory Booklet suitable for review by ASIC, procare that a meeting of the appropriate decision-making organ of CSL is convened to consider approving those sections of that draft that relate to CSL and its Related Entities as being in a form appropriate. for provision to ASIC for review;
(e) (approval of Explanatory Booklet) as soon as practicable after the conclusion of the review by ASIC of the Explanatory Booklet, procure that a meeting of the appropriate decision-making organ of CSL is convened to consider approving those sections of the Explanatory Booklet that relate to CSL and its Related Entities as being in a form appropriate for dispatch to the Target Shareholders, subject to approval of the Court;
(f) (representation) if requested by Target, produre that CSL is represented by coansel at the Coart hearings held for the purposes of sections 411(1) and 411(4)(b) of the Corporations Act in relation to the Schemes, at which, through its counsel, CSL will undertake (if requested by the Court) to do all such things and take all such steps within its power as may be necessary in order to ensure the falfilment of its and CSL Acquirer's obligations under the Schemes, and, to the extent that leave of the Court is required for CSL to be represented at those Court hearings, apply for that leave;
(g) (Deed Poll) prior to the despatch of the Explanatory Booklet, execute (and procure that CSL Acquirer executes) a deed poll substantially in the form of annexure C or in such other form agreed by the parties in writing under which each of CSL and CSL Acquirer covenants in favour of the Scheme Shareholders and the Scheme Optionholders to perform its respective obligations under the Schemes, and CSL covenants in favour of the Scheme Shareholders and the Scheme Optionholders to procure that CSL Acquirer performs CSL Acquirer's obligations under the Schemes;
(h) (Share Scheme Consideration) if the Share Scheme becomes Effective, provide the Share Scheme Consideration to Scheme Shareholders in accordance with the Share Scheme:
(i) (compliance with laws) use its reasonable endeavours to do everything reasonably within its power to ensure that the Transaction is effected in accordance with all laws and requiations applicable in relation to the Transaction; and

(funding for Options) subject to the Option Scheme becoming Effective and if requested by Target prior to the Implementation. Date, make available to Target a credit facility on arms' length commercial terms to enable Target to fund the Option Scheme Consideration.

6.3 Appeal Process

If the Coart refuses to make any orders convening the Scheme-Meetings or approving the Schemes, Target must appeal the Court's decision to the fullest extent possible (except to the extent that the parties agree otherwise, or independent Senior. Counsel indicates that, in their view, an appeal would have no reasonable prospect of success before the Scheme Quit. Date). If such an appeal is undertaken by Target then, anless the parties otherwise agree, CSL will bear Target's reasonable costs of the appeal.

6.4 Target Board Recommendation

Target must procure that, in the absence of:

(a) a bona fide Third Party Proposal being publicly announced or varied after the date of this Deed or, in the case of a Category. 2 Proposal, received by Target after the date of this deed, which the Target Board, acting in good faith (and in the case of a Category 2 Proposal, after receiving an opinion from an independent valuation expert), determines is:
reasonably capable of being valued and completed, taking 夼 into account all aspects of the Third Party Proposal; and
(ii) more favourable to the Target Shareholders and Optionholders than the Transaction, taking into account all the terms and conditions of the Third Party Proposal.

and the Target Board publicly recommending that the Third Party Proposal is in the interests of Target and its members; or

(b) in relation to the Share Scheme and the Special Distribution, the Independent Expert giving an opinion that the Share Scheme and the Special Distribution are not in the best interests of the Target Shareholders;

the Target Board will:

(c) ananimously recommend that the Transaction is in the best. interests of Target, Target Shareholders and Optionbolders. and not subsequeatly withdraw that recommendation in the absence of eather of the circumstances referred to in paragraph. (a) or paragraph (b);

(d) unanimoasty recommend that the Taroet Shareholders and Optionbolders vote in favour of all resolutions to be proposed at the respective Scheme Meetings and the General Meeting in relation to the Transaction and that they approve the Transaction, and not subsequently withdraw that recommendation in the absence of either of the circumstances. referred to in paragraph (a) or paragraph (b);
(e) include in all public statements relating to the Transaction following the execution of this Deed a statement to the effect of clauses 6.4(c) and 6.4(d); and
(f) not make any poblic statement or take any other public action. which would suggest that the Transaction is not unanimously. recommended by the Target Board in the absence of either of the circumstances referred to in paragraph (a) or paragraph (b),

and the Explanatory Booklet will state that each Target director intends to vote in favour of the Share Scheme, the Option Scheme and the Special Distribution Resolution is respect of all Target Shares and Options held by him or her or in which he or she otherwise has a relevant interest, in the absence of either of the circumstances referred to in paragraph (a) or paragraph (b).

6.5 Board Changes

(a) Target will use its reasonable endeavours to procure that, on or as soon as practicable after the Effective Date for the Schemes:
(i) three nominees of CSL are appointed as directors of Target effective as of appointment;
(ii) all but the two directors of Target specified in clause 6.5(b) below (other than the CSL nominees) simultaneously resign; and
(iii) one of the CSL nominees is appointed as Chairman of Target Board.
(b) Target will use its reasonable endeavours to procure that the Chairman and Chief Executive Officer of Target (as at the date of this Deed) remain directors of Target for a period. of six months after the Effective Date for the Schemes.

7. Representations and Warranties

7.1 Target's Representations

Target represents and warrants to CSL that, except as consented to by CSL that each of the following statements is true and accurate:

(a) (status) it, and each of its Related Entities, is a body corporate duly incorporated under the laws of its jurisdiction of incorporation;

(b) (power for business) it, and each of its Related Entities, has the power to own its assets and to carry on its basiness as now conducted or contemplated;
(c) (power for agreement) it has the corporate power to enter into and perform or cause to be performed its obligations. under this Deed and the Schemes and to carry out the transactions contemplated by this Deed and the Schemes;
(d) (corporate authorisations) it has taken all necessary corporate action to authorise the entry into and performance of this Deed and the Schemes and to carry out the transactions. contemplated by this Deed and the Schemes;
(e) (Deed binding) this Deed is its valid and biadiag obligation enforceable in accordance with its terms, subject to any necessary stamping;
{f} (transactions permitted) the execution and performance by it of this Deed and the Schemes and each transaction. contemplated by this Deed and the Schemes did not and will not violate in any respect a provision of a law or treaty or a judgment, ruling, order or decree of a Regulatory Authority. binding on it, or its constitution;
(g) (provision of Target Information) the Target Information:
(i) will be provided or included in the Explanatory Booklet in good faith; and
(ii) will comply in all material respects with the requirements. of the Corporations Act, the ASX Listing Rules and all relevant policy statements, practice notes and other quidelines and requirements of ASIC;
(h) (update of Target Information) it will provide to CSL all such further or new information of which it becomes aware that arises after the Explanatory Booklet has been dispatched until the date of the Scheme Meetings where that may be necessary to ensure that the Explanatory Booklet continues. to comply with the Corporations Act; and
(securities) its issued securities as at the date of this Deed are 125,176,327 Target Shares and 6,439,650 Target Options and, other than pursuant to the Target Options, neither it nor any of its Related Entities is under any obligation to issue. any shares or securities conversible into shares to any person. Except for the Target Options, ao option exists nor is Target or any of its Related Entities subject to any actual or contingent obligation to issue or convert securities.

7.2 CSL's Representations

CSL represents and warrants to Target that, except as consented to by Target:

(a) (status of CSE) it is a body corporate duly incorporated under the laws of its jarisdiction of incorporation;

Section 15 - Merger Implementation Deed and Deed Poll continued

(b) (status of CSL Acquirer) CSL Acquirer is, or will be when nominated by CSL, a body corporate daly incorporated under the laws of Australia and is, or will be when nominated by CSE, a wholly-owned Related Entity of CSL;
(c) (power of CSL for agreement) it has the corporate power to ester isto and perform or cause to be performed its obligations. ander this Deed and the Schemes and to carry out the transactions contemplated by this Deed and the Schemes to be carried out by CSL;
(d) (power of CSL Acquirer for Schemes) CSL Acquirer has. or will have when nominated by CSL, the corporate power to carry out the transactions contemplated by the Schemes to be carried out by CSL Acquirer;
(e) (corporate authorisations for CSE) it has taken all necessary corporate action to authorise the entry into and performance of this Deed and the Schemes and to carry out the transactions contemplated by this Deed and the Schemes to be carried out by CSL;
(f) (corporate authorisations for CSL Acquirer) CSL Acquirer has, or will have when nominated by CSL, taken all necessary corporate action to carry out the transactions conternalated by the Schemes to be carried out by CSL Acquirer;
(c) (Deed binding) this Deed is its valid and binding obligation esforceable in accordance with its terms, subject to any necessary stamping;
(h) (transactions permitted) the execution and performance by it of this Deed and the Schemes and each transaction. contemplated by this Deed and the Schemes did not and will not violate in any respect a provision of a law or treaty or a judgment, raling, order or decree of a Regulatory Authority binding on it, or its coastitution or any other document or agreement that is binding on it or its assets.
(provision of CSL Information) the CSL Information: (i)
(i) will be provided in good faith; and
们 will comply in all material respects with the requirements of the Corporations Act, the ASX Listing Rufes and all relevant policy statements, practice notes and other gaidelines and requirements of ASIC;
(update of CSL Information) it will provide to Target all such (î) further or new information of which it becomes aware that arises after the Explanatory Booklet has been dispatched antil the date of the Scheme Meetings where that may be necessary to ensure that the Explanatory Booklet continues to comply with the Corporations Act; and
(k) (finance for Share Scheme) it will have available sufficient cash amounts to pay in full the Share Scheme Consideration to Scheme Shareholders immediately on the Implementation Date.

(I) (finance for Option Scheme) # Target makes a request to CSL prior to the implementation Date under clause 6.2(i), it will have the capacity to make available to Target the credit facility referred to in that clause.

7.3 Timing of Representations

Each representation and warranty made under this Clause 7 is made as at the date of this Deed and, unless otherwise expressly stated, as at 8.00am on the Second Court Date, in relation to the representation and warranty in clause 7.3(i), the parties acknowledge that the namber of Target Shares and Target Options as at 8.00am on the Second Court Date may change as a result of actions permitted or required by this Deed, the Transaction or as a result of the expiry of Target Options.

7.4 Reliance by Parties

Each party (the representor) acknowledges that in entering into this Deed the other party has relied on the representations and warranties provided by the representor under this clause 7. The representations and warranties provided by the representor are not extinguished or affected by any investigation made by or on behalf of the other party into the affairs or basiness of the representor or its Related Entities.

7.5 Survival of Representations

The representations and warranties provided by each party under this clause 7:

(a) are severable:
(b) will survive the termination of this Deed; and
(c) are given with the intent that liability ander them will not be coafined to breaches of them discovered prior to the date of termination of this Deed.

8. Confidentiality

8.1 Target's Obligations

Target acknowledges and agrees that:

(a) it will use the CSL Confidential information exclusively for the purpose of preparing the Explanatory Booklet and for noother parpose (and, without limitation, will not make any ase of the CSL Confidential information or any part of it to the competitive disadvantage of CSL or any of its Related Entities);
(b) it will keep the CSL Confidential Information in confidence and will not disclose the CSL Confidential Information except:
(i) to such Representatives of Target as require the CSL Confidential Information for the parpose of preparing the Explanatory Booklet, but only if any such person owes a duty of confidentiality to Target and is aware of the obligations of Target under this clause 8.1;
(ii) subject to clause 9.3, as required by law; or
(iii) with the prior consent of CSL;
(c) it will immediately notify CSL of any suspected or actual. usauthorised ase, copying or disclosure of the CSL Confidential Information: and
(d) it will, upon request by CSL, return to CSL all CSL Confidential information provided to Target and its Representatives, together with any notes, records or copies of the CSL Confidential information generated by any such person.

8.2 CSL's Obligations

CSL acknowledges and agrees that:

(a) it will not make any use of the Target Confidential Information or any part of it except in connection with the Schemes or any other transaction contemplated by this Deed and will not make any use of the Target Confidential Information or any part of it to the competitive disadvantage of Target or any of its Related Entities;
(b) it will keep the Target Confidential Information in confidence and w@not disclose the Target Confidential Information except:
(i) to such Representatives of CSL including CSL's financiers in connection with the Schemes as require the Target Confidential Information in connection with the Schemes or any other transaction contemplated by this Deed, but only if any sach person owes a duty of confidentiality to CSL and is aware of the obligations of CSL ander this clause 8.2:
(ii) subject to clause 9.3, as required by law; or
(iii) with the prior consent of Target;
(c) it will immediately notify Target of any suspected or actual usauthorised ase, copying or disclosure of the Target Confidential Information: and
(d) it will, upon request by Target, return to Target all Target Confidential Information provided to CSL and its Representatives, together with any notes, records or copies of the Target Confidential Information generated by any such person.

8.3 Takeover Bid

Notwithstanding clauses 8.2 and 9.3, CSL and each Related Entity of CSL will not be precluded from making a takeover bid for Target Shares or other securities in Target if a third party. publicly proposes to make or vary a takeover bid for Target. Shares or if CSL or Target terminates this Deed, in any of these circamstances, CSL and any Related Entity of CSL may disclose Target Confidential Information in a bidder's statement under the Corporations Act, or in any document or medium pursuant to any applicable legal requirement, for this purpose and without complying with the procedure set out in clause 9.3 provided that:

(a) any such disclosure of Target Confidential Information is, in the reasonable opinion of CSL after taking legal advice, necessary for CSL to comply with its disclosure obligations. under section 636(1) of the Corporations Act, any applicable legal requirement, or to avoid any contravention of, or liability under, Chapters 6, 6B, 6CA or Part 7.10 of the Corporations Act: and
(b) CSL ases reasonable endeavours to easure that any such disclosure of Target Confidential Information is undertakenin a manner that would, so far as possible:
(i) limit the disclosure only to the extent considered necessary under paragraph (a); and
(ii) avoid or minimise the potential for the disclosure to cause any member of Target Group to breach a material confidentiality obligation owed to a counterparty to a Material Contract or to suffer material loss (taking into account the statutory disclosure obligations of Target in connection with any such takeover bid).

9. Public Announcements

9.1 Announcement and Recommendation

Immediately after the execution of this Deed, Target and CSL will issue a joint public announcement in the form of Schedule 7.

9.2 Public Announcements

Subject to clause 9.3, no public announcement or disclosure of the Transaction or any other transaction the subject of this Deed. or the Schemes may be made other than in a form approved. by each party (acting reasonably), but each party must use all reasonable endeavours to provide such approval as soon as practicable.

Section 15 - Merger Implementation Deed and Deed Poll continued

9.3 Required Disclosure

Subject to clause 9.4, where a party is required by law or the ASX Listing Rules to make any announcement or to make any disclosure of the confidential information of the other party or in connection with the Transaction or any other transaction the subject of this Deed or the Schemes, it may do so only after it has given at least one Business Day's notice, or such lesser period as may be required or permitted by the effect of a legal obligation, but in any event prior notice, to the other party and has ased reasonable endeavours to consult with the other party and taken all reasonable steps to restrict that disclosure to the greatest extent possible.

9.4 Statements on Termination

The parties must act in good faith and use all reasonable endeavours to issue an agreed statement or statements in respect of any termination of negotiations provided for in this Deed and will make no statements or disclosure in respect of the termination of this Deed except in accordance with clauses 9.1 and 9.3.

10. GST

10.1 Definitions

In this clause 10:

Consideration has the meaning given by the GST Law.

GST has the meaning given by the GST Law.

GST Amount means in relation to a Taxable Supply the amount of GST payable in respect of that Taxable Supply.

GST Group has the meaning given by the GST Law.

GST Law has the meaning given by the A New Tax System (Goods and Services Tax) Act 1999 (Cth), or, if that Act does not exist means any Act imposing or relating to the imposition or administration of a goods and services tax in Australia and any requlation made under that Act.

Input Tax Credit has the meaning given by the GST Law and a reference to an Input Tax Credit entitlement of a party includes an Input Tax Credit for an acquisition made by that party but to which another member of the same GST Group is entitled under the GST Law

Recipient has the meaning given by the GST Law.

Tax Invoice has the meaning given by the GST Law.

Taxable Supply has the meaning given by the GST Law excluding the reference to section 84-5 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth).

10.2 GST to be Added to Amounts Payable

If GST is payable on a Taxable Supply made under, by reference to or in connection with this Deed, the party providing the Consideration for that Taxable Supply mast also pay the GST Amount as additional Consideration. This clause does not apply to the extent that the Consideration for the Taxable Supply is expressly stated to be GST inclusive or inclusive of GST. Payment of the GST Amount is conditional upon the prior delivery to the Recipient of the supply of a valid Tax Invoice.

10.3 Liability Net of GST

Any reference in the calculation of Consideration or of any indemnity. reimbarsement or similar amount to a cost, expense or other liability incurred by a party, must exclude the amount of any Input. Tax Credit entitiement of that party in relation to the relevant cost, expense or other liability. A party will be assumed to have an entitiement to a full input Tax Credit unless it demonstrates. otherwise prior to the date on which the Consideration mast be provided.

10.4 Cost Exclusive of GST

Any reference in this Deed (other than in the calculation of Consideration) to cost, expense or other similar amount (Cost), is a reference to that Cost exclusive of GST.

10.5 GST Obligations to Survive Termination

This clause 10 will continue to apply after expiration or termination of this Deed.

11. Termination

11.1 Termination

Without prejadice to any other rights of termination under this Deed:

(a) either party may terminate this Deed by notice to the other party if:
{i) the Effective Date does not occur on or before the Scheme Quit, Date (other than as the result of a breach by that party of its obligations under this Deed);
(ii) the other party is in material breach of its obligations under this Deed fincluding any material breach of a representation. or warranty provided under this Deed) at any time before the Second Court Date and has not rectified that breach within 10 Business Days (or any shorter period ending at 5.00pm on the day before the Second Court Date) after it is given notice by the first party specifying that breach. and requiring it to be rectified;
(iii) at the Scheme Meeting or any adjournment or postponement thereof at which the Share Scheme is voted on, the Share Scheme is not approved by the necessary majorities of the Target Shareholders; or
(iv) any court, the Takeovers Panel or Regulatory Authority has issued any order, decree or raling or taken any other action permaneatly enjoining, restraining or otherwise prohibiting the Transaction, or has refesed to do anything necessary to permit the Transaction, and such order, decree, raling or other action has become final and not appealable;
(b) CSL may terminate this Deed at any time prior to the Second Court Date by notice to Target if any Director of the Target Board withdraws its recommendation of the Schemes or the Special Distribution or makes a public statement that it no longer supports the Schemes or the Special Distribution.
(c) Target may terminate this Deed at any time prior to the Second Court Date by notice to CSL if a bona fide Third. Party Proposal is publicly announced (or an existing Third Party Proposal is varied) after the date of this Deed or, in the case of a Category 2 Proposal, received by Target after the date of this Deed, which the Target Board, acting in good faith. (and in the case of a Category 2 Proposal, after receiving an opinion from an independent valuation expert), determines is:
(i) reasonably capable of being valued and completed. taking into account all aspects of the Third Party Proposal; and
(ii) more favourable to the Target Shareholders than the Share Scheme, taking into account all the terms and conditions of the Third Party Proposal,

and the Target Board publicly recommends that the Third Party Proposal is in the interests of Target and its members;

(d) where a party has the right to terminate this Deed and that right arises before the Second Court Date, that party's right to terminate this Deed ceases at 8,00am on the Second Court. Date.

11.2 Notice of Breach

Each party must give notice to the other party as soon as practicable after it becomes aware of a breach by it of its obligations under this Deed (including any breach of a representation or warranty provided under this Deed).

11.3 Effect of Termination

In the event of termination of this Deed by either CSL or Target pursuant to this clause 11 or clause 3.6, each party:

(a) will be released from its obligations under this Deed (except) its obligations under clauses 8, 9.4 and 12.9); and
(b) will retain the rights it has or may have against the other party in respect of any past breach of this Deed.

12. Miscellaneous

12.1 Notices

Any notice, demand, consent or other communication (a Notice) given or made ander this Deed:

(a) must be in writing and signed by a person daly authorised by the sender;
(b) must be delivered to the intended recipient by prepaid postor by hand or fax to the address or fax number below or the address (being an address in Australia) or fax namber last notified by the intended recipient to the sender:
(i) to CSL: CSL Limited 45 Poplar Road, Parkville Victoria Attention: Company Secretary & General Counsel Facsimile: (03) 9387 8454
(ii) to Target: Zenyth Therapeutics Limited 576 Swan Street, Richmond Victoria Attention: Company Secretary Facsimile: (03) 9208 4356
(c) will be taken to be duly given or made:
(i) in the case of delivery in person, when delivered;
(ii) in the case of delivery by post, two Business Days after the date of posting (if posted to an address in the same country); and
(iii) in the case of fax, on receipt by the sender of a transmission. control report from the dispatching machine showing the relevant number of pages and the correct destination fax. machine sumber or name of recipient and indicating that the transmission has been made without error,

but if the result is that a Notice would be taken to be given. or made on a day that is not a business day in the place to which the Notice is sent or is later than 4.00pm flocal time). it will be taken to have been duly given or made at the commencement of business on the next business day in that place.

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12.2 No Waiver

No failure to exercise nor any delay in exercising any right, power or remedy by a party operates as a waiver. A single or partial exercise of any right, power or remedy does not preclude any other or further exercise of that or any other right, power or remedy. A waiver is not valid or binding on the party granting that waiver enfess made in writing.

12.3 Remedies Cumulative

The rights, powers and remedies provided to each party in this Deed are in addition to, and do not exclude or limit, any right, power or remedy provided by law or equity or by any agreement.

12.4 Entire Agreement

This Deed and the Confidentiality Agreement contain the entire agreement between the parties as at the date of this Deed with respect to their subject matter and supersede all prior agreements. and understandings between the parties in connection with them.

12.5 Amendment

No amendment or variation of this Deed is valid or binding on a party unless made in writing executed by CSL and Target which may so make an amendment or variation notwithstanding that one or more other parties or persons may be entitled to the benefit of all or any of the provisions of this Deed.

12.6 Assignment

The rights and obligations of each party under this Deed are personal. They cannot be assigned, encumbered or otherwise dealt with and no party may attempt, or purport, to do so without the prior consent of the other party.

12.7 No Merger

The rights and obligations of the parties will not merge on the completion of any transaction contemplated by this Deed. They will survive the execution and delivery of any assignment or other document entered into for the purpose of implementing a transaction.

12.8 Further Assurances

Each party agrees to do all things and execute all deeds, instruments, transfers or other documents as may be necessary or desirable to give full effect to the provisions of this Deed and the transactions conternolated by it.

12.9 Costs and Stamp Duty

Except as provided below, each party must bear its own costs, charges and expenses arising out of or incidental to the negotiations leading to or the preparation of this Deed and the proposed, attempted or actual implementation of this Deed. CSL must pay, or procure that CSL Acquirer pays, any stamp duty that is payable on the transfer to CSL Acquirer of the Target Shares pursuant to the Schernes.

12.10 Severability of Provisions

Any provision of this Deed that is prohibited or enenforceable in any jarisdiction is ineffective as to that jurisdiction to the extent. of the prohibition or unenforceability. That does not invalidate the remaining provisions of this Deed nor affect the validity or enforceability of that provision in any other jurisdiction.

12.11 Governing Law and Jurisdiction

This Deed is governed by the laws of Victoria. Each party submits to the non-exclusive jurisdiction of coarts exercising jurisdiction. there in connection with matters concerning this Deed.

12.12 Counterparts

(a) This Deed may be executed in any number of counterparts. and by the parties on separate counterparts. All counterparts together will be taken to constitute one instrument.
(b) This Deed is binding on the exchange of duly executed counterparts.
(c) The parties agree that a copy of an original executed counterpart sent by facsimile machine to the facsimile number of the other party specified in clause 12.1(b), instead of the original, is sufficient evidence of the execution of the original and may be produced in evidence for all purposes in place of the criginal.

Schedule 1

Timetable

Not reproduced here. Please refer to the 'Important Dates and Times' at the beginning of this Explanatory Booklet.

Schedule 2

Listed Material Contracts

Category 1

Agreement dated 26 August 2005 between CSIRO, Ludwig Institute for Cancer Research and Amrad Operations Pty Ltd in respect of the project 'Epidermal Growth Factor Technology'.

Category 2

Development and Collaboration Agreement dated 19 December 2001 between Cambridge Antibody Technologies Ltd and Amrad Operations Pty Ltd in respect of the project `GM-CSF Receptor'.

Exclusive Licence and Research Collaboration Agreement as of 30 June 2003 between Merck & Co., Inc and Amrad Operations Pty Ltd. in respect of the project "IL-13RI".

Schedule 3

Material Contracts

Not reproduced here.

Schedule 4

Patents

Patent Number	Name of Patent	Assignee(s)
WO 97/15663	A novel haemopoletist receptor and genetic sequences encoding same.	Amrad Operations Pty Etd
WO 02/00876	Truncated EGF receptor	Commonwealth Scientific and Industrial Research Organisation. Ludwig Institute for Cancer Research
WO 94/09149	Monocional antibody	Amrad Corporation Limited

Schedule 5

Option Scheme Consideration

Not reproduced here. Please refer to the Option Scheme in Section 14 of this Explanatory Booklet.

Schedule 6

Form of Special Distribution Resolution

Not reproduced here. Please refer to the Notice of General Meeting in Section 11 of this Explanatory Booklet.

Schedule 7

Form of Joint Announcement

Not reproduced here.

Section 15 - Merger Implementation Deed and Deed Poll continued

Executed and delivered as a deed in Melbourne

Executed as a deed in accordance with s127 of the Corporations Act by CSL Limited:

Risse

Director Signature

lan Andrew Renard

Print Name

Director/Secretary Signature

Dr Brian McNamee

Print Name

Executed as a deed in accordance with s127 of the Corporations Act by Zenyth Therapeutics Limited:

Director Signature

lan Davis

Print Name

robert Nost.

Director/Secretary Signature

Andrew Nash

Print Name

Annexure A - Share Scheme

Not reproduced here. Please refer to Section 13 of this Explanatory Booklet.

Annexure B - Option Scheme

Not reproduced here. Please refer to Section 14 of this Explanatory Booklet.

Annexure C - Deed Poll

Deed Poll

By CSL Limited in favour of each Scheme Shareholder

1.	Definitions and Interpretation	132
1.1	Definitions	132
1.2	Nature of Deed Poll	132
2.	Conditions Precedent and Termination	132
2.1	Conditions Precedent	132
2.2	Termination	132
2.3	Consequences of Termination	132
3.	Compliance with Share Scheme Obligations	132
3.1	Timing and Procedures	132
3.2	Miscellaneous Obligations	132
4.	Warranties	133
5.	Continuing Obligations	133
6.	Further Assurances	133
2.	Notices	133
8.	Remedies Cumulative	133
9.	Variation	133
10.	No Waiver	133
11.	Costs and Stamp Duty	133
12.	Assignment	133
13.	Governing Law and Jurisdiction	133
	Annexure A	134

Section 15 - Merger Implementation Deed and Deed Poll continued

Deed Poll Dated 6 September 2006

Bv

CSE Limited (ABN 99-051-588-348) of 45 Poplar Road, Parkville, Victoria (CSL).

In Favour of

Each Scheme Shareholder

Recitals

A On 17 July 2006, Zenyth Therapeatics Limited (ABN 37 006 614 375) (Target) and CSL entered into the Merger Implementation Deed.
B Under the Merger implementation Deed, CSL has agreed. subject to the satisfaction or waiver of certain conditions, to execute this Deed Poll.
C CSL is entering into this Deed Poll to covenant in favour of Scheme Shareholders to perform its obligations under the Share Scheme.

It is agreed as follows.

1. Definitions and Interpretation

1.1 Definitions

In this document, the following definitions apply unless the context regaires otherwise.

(a) Words and expressions defined in the Share Scheme, a copy of which is annexed to this Deed Poll, have the same meanings when used in this Deed Poll.
(b) This Deed Poll is to be interpreted according to corresponding rules to those set out in clause 1.2 of the Share Scheme save that references to 'this Share Scheme' in that clause 1.2 will be taken as being references to 'this Deed Poli'.

1.2 Nature of Deed Poll

CSL acknowledges that this Deed Poll may be relied on and enforced by any Scheme Shareholder in accordance with its terms even though those persons are not party to this Deed Poll.

2. Conditions Precedent and Termination

2.1 Conditions Precedent

CSL's obligations ander Clause 3 are subject to the Share Scheme becoming Effective.

2.2 Termination

The obligations of CSL under this Deed Poll to Scheme Shareholders will automatically terminate, and the terms of this Deed Poll will be of no further force or effect, if the Merger Implementation Deed is terminated in accordance with its terms. prior to the occurrence of the Effective Date for the Share Scheme.

2.3 Consequences of Termination

If the obligations of CSL under this Deed Poll are terminated. under Clause 2.2 then, in addition and without prejudice to any other rights, powers or remedies available to CSL:

(a) CSL is released from its obligations to ferther perform this Deed Poll except those obligations contained in clause 11; and
(b) Scheme Shareholders retain the rights they have against. CSL in respect of any breach of this Deed Poll by CSL which occurred before termination of this Deed Poll.

3. Compliance with Share Scheme Obligations

3.1 Timing and Procedures

Subject to Claase 2, in coasideration of the traasfer of each Scheme Share held by Scheme Shareholders to CSL, CSL will, as contemplated ander clauses 4.2(c)(v) and 4.3 of the Share-Scheme, provide the Scheme Consideration to which Scheme Shareholders are entitled, in accordance with the rights and procedures set out in clauses 4.2(c)(v) and 4.3 of the Share Scheme.

3.2 Miscellaneous Obligations

Subject to Claase 2, CSL will comply with its obligations ander clauses 4.2(c)(v), 4.2(d) and 4.3 of the Share Scheme.

4. Warranties

CSL represents and warrants that:

(a) it is a corporation validly existing under the laws of its place of incorporation; and
(b) it has the corporate power to enter into and perform its obligations under this Deed Poll and to carry out the transactions contemplated by this Deed Poll:
(c) it has taken all necessary corporate action to authorise its entry into this Deed Poll and has taken or, if the conditions precedent referred to in Clause 2.1 are satisfied or waived, will take all necessary corporate action to authorise the performance of this Deed Poll and to carry out the transactions contemplated by this Deed Poll;
(d) this Deed Poll is valid and binding upon it and enforceable in accordance with its terms; and

(e) this Deed Poll does not conflict with, or result in the breach of or default under, any provision of its constitution or any material term or provision of any agreement or deed poll or any writ, order or injunction, judgment, law, rule or regalation. to which it is a party or subject or by which it is bound.

5. Continuing Obligations

This Deed Poll is irrevocable and remains in full force and effect antil CSL has completely performed its obligations under this Deed Poll or the earlier termination of this Deed Poll under Clause 2.

6. Further Assurances

CSE will do all things and execute all deeds, instruments, transfersor other documents as may be necessary or desirable to give full effect to the provisions of this Deed Poll and the transactions contemplated by it.

7. Notices

(a) A notice, consent or other communication (a Notice) under this Deed Poll is only effective if it is:
(i) in writing, signed by or on behalf of the person giving it;
(ii) addressed to the person to whom it is to be given; and
(iii) either:
- (A) delivered or sent by pre-paid mail to that person's address: or
- (8) sent by fax to that person's fax number and the machine from which it is sent produces a report that states that it was sent in full
(b) A Notice that complies with this Clause 7 is regarded as given and received:
(i) if it is delivered or sent by fax:

(A) by 5.00pm (local time in the place of receipt) on a Business Day - on that day; or

(8) after 5.00pm (local time in the place of receipt) on a Business Day, or on a day that is not a Business Day on the next Business Day; and

(ii) if it is sent by mail:
(A) within Australia three Business Days after posting; or
(8) to or from a place outside Aastralia -- seven Business Days after posting.
(c) A person's address and fax number are those set out below, or as the person notifies the sender:

Company: CSL Address: 45 Poplar Road, Parkville, Victoria 3052 flacsimile: (03) 9387 8454 Attention: Company Secretary

8. Remedies cumulative

The rights, powers and remedies provided to CSL and the Scheme Shareholders in this Deed Poll are in addition to, and donot exclude or limit, any right, power or remedy provided by law. or equity.

9. Variation

A provision in this Deed Poll may only be varied by CSL if:

(a) the variation is agreed to by Target, which agreement Target may give or withfaold in its absolate discretion and without reference to or approval by any member of Target or Scheme. Shareholder being required; and
(b) the Court indicates that the amendment would not of itself. preclude approval of the Share Scheme.

CSL will enter into a further Deed Poll in favour of the Scheme Shareholders giving effect to any such amendment.

10. No Waiver

11. Costs and Stamp Duty

All stamp duty that may be payable on or in connection with this Deed Poll and any instrument effected by, executed under or parsuant to this Deed Poll must be borne by CSL. CSL must indemaily each Scheme Shareholder on demand against any liability for those costs and that stamp duty.

12. Assignment

The rights and obligations of CSL and each Scheme Shareholder ander this Deed Poll are personal. They cannot be assigned, encambered or otherwise dealt with and neither CSL nor any Scheme Shareholder may attempt, or purport, to do so without the prior written consent of Target and CSL.

13. Governing Law and Jurisdiction

This Deed Poll is governed by the laws of Victoria. CSL submits to the non-exclusive jarisdiction of courts exercising jurisdiction. there in connection with matters concerning this Deed Poll.

Section 15 - Merger Implementation Deed and Deed Poll continued

Executed and delivered as a Deed Poll in Melbourne, Victoria

Executed as a Deed Poll in accordance with s327 of the Corporations Act by CSL Limited:

Director Signature

Dr Brian McNamee

Print Name

$\overline{\mathcal{I}}$

Director/Secretary Signature

Peter Turvey

Print Name

Annexure A

Share Scheme

Not reproduced here. Please refer to Section 13 of this Explanatory Booklet.

DAMIL.

Zenyth Therapeutics Limited

Independent expert's report 7 September 2006

Delotte Financial services guide

^* Santember 2006

What is a Financial Services Cable®

This Financial Services Guide ("FSG") is an immunt decumen be pursue of which is to assist you in deciding whether to use any of the acneral financial artistical statics provided by Definite Corporate Finance Ptv Limited (ABN 19 986333 127). The use of "we", "sis" or "own" is a reference to Defairte Corporate Finance Pty Limited as the holder of Australian Pinameint Services i locuce ("AFSI "). Mr. 241457. The contents of this F5G include: who we are and how we can be contacted what services we are authorised to provide under our AFS1. how we fand any other relevant parties) are remancemed in relation to any general financial groduct advice we may provide details of any concreted conflicts of interest details of our internal and external divente resolution systems and hase vest can assess them.

โยมือรายนปิดอ แอ็นาค เละ

We have been cranaad by Zanvth Thermomitics Limited (Zenvth) to eive general financial moduct advice in the farm of a report to be provided to you in connection with a proposal from CSL Limited (CSL) to acquire 100% of the issued stares in Zenvih and for the canceliation of Zenyth options via schemes of aranovazna (dae Promosal). Ven are not the music or narties who engaged us to prepare this report. We are not acting for any person other than the party or natics who engaged us. We are required to give vonan FSG by law because our report is being provided to you. You may contact an asing the details heated สต้นงานช่ว

Deloitte Corporate Finance Pty Limited is altimately owned by the Australian mathership of Deloitte Touche Tolumitsa. The Australian manacrabin of Deloitte Tacche Tohnsten and its related entities provide services reimarily in the areas of mafit, tax. .
Amailiau, nad financial ndvisory services. Chir directors may be marinees in the Australian menership of Deloitte Touche Tohmasa. The Australian nationship of Delasite Touche Tohnsatsu is a member firm of the Defoitte Touche Tehnaan Vereh – As the Debzine Tenebe Tehnasa. Versin is a Swiss Verein tassociation), neither it noraav of its member liens has any liability for each other's acts or orningious. Useh of the member firms is a separate and independent legal critic operating under the names "Delofite," "Delofite & Touche," "Detaine Touche Talmasu." or other related names.

.
Imbrežin i Čestinovita člevaricia Pre i imidači. ASM \$5003833 127 AFSL 241483

: SI Leandain Street (Germane VII) ISB) PO Box 786 Welkersme VIC 3001 According to

The financial rendeed advice in our renest is provided. by Deloitte Conxwate Finance Pty Limited and not by the Australian nortrership of Definitie Tauche Talmatsa, its reinted entities, or the Defaitte Touche-Tobaaatan Vereim.

We do not have any formal associations or relationships with any entities that are issuers of financial products. However, was should note that we and the Australian partnership of Deloitte Touche Talanatsa (and its related bodies correspac) may from time to time provide professional services to financial product issues in the ardinary course of business.

What flowscial services are we licensed to nrovide?

The AFSL we hold unificrises us to provide the following financial services to both retail and wholesale clients:

to provide financial product advice in respect of securities, debentanés, stacks ar honds issued oraroposed to be issued by the acveration and inuress in managed investment schemes including investor directed postfolio achemos
to deal in a financial product by arranging for another person to apply for, accurire, vary or dismose of financial products in respect of securities and debentures, stocks or bom'ls issued or proposed to be issued by the covernment.

Information about the center! financial product advice we arovide

The firmulal product advice provided in eur report is kaowa as "peneral advice" because it does not take into account warr acromal objectives. Enancial situation or needs. You should consider whether the agneral advice contained in our report is appropriate for you, having reased to your own nersonal obicetives, firancial situation or needs. We recommend you carefully read the relevant Bidder's Statement provided by CSL and Taruet's statement provided by Zenyth. The mariase of these documents is to help von make an informed decision about the Proposal from CSL.

How are we and our combuyees remancemed?

Our fees are usually determined on an inualy basis: however they may be a fixed amount or derived using another basis). We may also seek reimbursement of any out-of-pocket expenses incurred in providing the morision

Delaite Financial services quide

Fee arrangements are agreed with the many or narries. who actually engage us, and we confirm our remaneration in a written fetter of enustrement to the party or parties who actually engage us. Neither Definitte Corporate Finance Pty Limitest norits directory and officers, nor uny related bodies correstate or associates and their directors and officers, receives any commissions or other benefits, except for the fees for services rendered to the morty or parties who actually engage us. Our fee is \$125,000, excluding GST, and will also be disclosed in the relevant PDS, wifer or other disclosure. document prepared by the issuer of the financial preshat.

All of our employees receive a salary. Our employees are cligible for annual salary increases and bonuses based on overall performance but do not receive any commissions or ather benefits arisinadirectly from services provided to Zenyth. The remancration paid to our directors reflects their individual contribution to the company and covers all nepects of performance. Our directors do not receive any commissions or other benefits in connection with จนจะ แล้นรับเอ

We do not can commissions or morde ether benefits to other parties for referring prospective clients to us.

What should you do if you have a complaint?

If you have any concerns regarding our report, you may wish to advise us. Our internal complaint handling process is designed to respond to your concerts promptly and equitably. Please address your complaint in writing to:

The Complaints Officer Practice Protection Group PO Box N250 Grosvenor Place Sydney NSW 1220

If you are not satisfied with the steps we have taken to resolve vour complaint, you may contact the Financial Industry Complaints Service ("FICS"). FICS provides free advice and assistance to consumers to belts them resolve complaints relating to mentions of the financial services industry. Complaints may be submitted to FICS at:

Financial Industry Complaints Service PO Box 379 Collins Street West Melbaurne VIC 8007 Telephane: 1300 780 808 Fax: +61 3 9621 2291

Internet: http://www.flas.usn.au

If your complaint relates to the professional conduct of a person who is a Chartered Accountant, you may wish to lodge a complaint in writing with the Institute ef Chartsred Acemetants in Australia ("ICAA"). The ICAA is the professional body responsible for setting and upholding the professional, ethical and technical standards of Chartered Accountants and canhe contacted at:

The Inditula of Chartered Accrumative GPO Box 3921 Svåner NSW 2001 Telephone: +61 2 9290 1344 Pasc: 461 2 9262 1512

Specific exatact details for lodging a complaint with the ICAA can be obtained from their website at http://www.icas.com.as/about/index.cfu. The Australian Securities and Investments Commission ("ASR") regulates Australian companies, financial markets, financial services erganisations and professionals who deal and advise in investments, supermanantion, insurance, deposit taking and credit. Their website consairs information on kalging complaints about companies und infividual persons and sets out the types of complaints handled by ASK. You may contact ASK. as fallows:

info line: 1 300 300 630 Umail: infolinciónsic guy au Internet: http://www.asic.gay.as/asic/asic.hsf

Delrista

Osciolini Oranicesista Financourti⁸⁹s i involved ABN WOOD 822 127 APSI MARKET

the Landsk Crowl Weisserne VIC 3000 PO Barn 788 Malbourne VIC 3501 Associated that

m wi Twi wit als i write thin Fasc Herrich Education 771-8 www.delection.com

The Directors Zenyth Therapeutics Linsted 576 Swan Sareet Richmand VK" 3321

7 September 2006

Dear Directors

Independent expert's report

Intrastuction

On 17 July 2006, Zenyth Therapeutics Limited (Zenyth or the Company), meether with the Board of CSI, Limited (CSL), announced a monosal under which CSL would acquire 100% of the issued shares in Zemels via a scheme of argamenteent (the Proposal). If the Proposal is argenced, Zenvih sharefulders (Shareholders) will receive consideration of 82 cents per Zenvib share tibe Share Scheme) and, subject to further shareholder approval, a pro-rata capital return of Zenyth's shareholding in Avexa Limited (Avexa) (Special Distribution). The Special Distribution is conditional on shareholders approving the acquisition of Zenyth. We have considered the Share Scheme and the Special Distribution collectively in evaluating the Proposal. The overall consideration officed under the Proacoal is anonoximately 86 cents, comprising 82 cents cash and Ayexa shares of around 4 cents ner Zenvik share.

Zenyth also nanounced a proposed scheme of arrangement under which the outstanding options to subscribe for Zenvth shares (with the excention of options uranted to senior managers of Zenvth in July 2006) (Zenvil: Ontions) will be cancelled for cash consideration (Ontion Scheme). The Ontion Scheme is conditional upon the Proposal being approved.

If the Francesk is approved, Zerich will become a wholly overed subsidiary of CSL and will subsequently be delisted from the Australian Stock Exchange (ASX). The board of Zenyth have prepared an explanatory booklet, containing the detailed terms of the Proposal (the Explanatory Bookket) and an overview of the Proposal is provided in Section 1 of our report.

Purpose of the report

Whilst an independent expert's report is not required to meet any statutory offigations, the directors of Zenvih have engaged Deloitte Cossorate Firance Pty Limited (Deloitte) to prepare an independent expert's report advising whether, in our opinion, the Proposal is in the best interest of Shareholders and whather the Option Scheme is in the best interest of holders of Zenyth Options (Optionholders).

This report is to be included in the Explanatory Booklet to be sent to Sharebalders and Ontionholders and has been prepared exclusively for the purposes of assisting Sharebolders in their consideration of the Share Scheme and the Special Distribution and assisting Ontionholders in their consideration of the Option Scheme. The report should not be used for any other purpose.

' (1969) de Jachiel (1914 understen gepaansche spekt Burkersternis Indelpreken (1950) (1965)

škaaden of .
Meáchthe Tucches Tzernennac

Nalosa.

Summary and conclusion

In our emission, in the absence of a higher offer:

the Proposal is fair and reasonable and it is therefore in the best interest of the Shareholders as a senie
the Option Scheme as a whole is not fair but reasonable and on balance it is in the best interest of the Optionholders as a whole.

In arriving at this opinion, we have had regard to the following factors;

The Proposal is fair

Set out in the table below is a comparison of our assessment of the fair market value of a Zenyth share with the consideration offered by CSL (including the value of Avexa shares to be distributed under the Special Distribution).

Evaluation of fairness

		in the contract of $\mathbb{S}^2$ . The contract of $\mathbb{S}^2$ , $\mathbb{S}^2$ , and $\mathbb{S}^2$ , and $\mathbb{S}^2$ , and $\mathbb{S}^2$ , and $\mathbb{S}^2$ , and $\mathbb{S}^2$ , and $\mathbb{S}^2$ , and $\mathbb{S}^2$ , and $\mathbb{S}^2$ , and $\mathbb{S$
	Estimated fair market value of a Zenyth share (Section 6): Leimard hir make value of consideration offered	自家药	1 QK T RG.

Source: Delotte analysis

Note: All amounts sided in this report are in Australian dollars (\$) unless otherwise stated

The consideration offered by CSL is within the range of our estimate of the fair market value of a Zeryth share. Accordingly it is our opinion that the Progosal is fair.

Fulanation of a Ecuptic share

The principal assets of Zenyth are cast and projects to develop pharmaceutical drugs, principally to trest inflammation and cancer.

We have estimated the fair market value of a Zenyth share using the discounted cash flow method. The discounted cash flow method requires the determination of an approariate discount rate and the moiection of future cash flows. We engaged Acutty Technology Management Pty Limited (Acutty), an independent expert in biotechnology, to prepare a report providing projections of cash flows for each of Zenvik's projects and an assessment of the probability of each project successfully advancing through each shase of its develocunest.

We selected a nominal after tax discount rate of between 16.0% and 18.5% to discount the estimated future cash flows of Zenvih's business to their present value. In selecting an appropriate range of discount rates and in applying the selected discount rates to the cush flow projections, we have considered a muniter of risks associated with the cash flows:

the projected cash flows have been probability adjusted to reflect the statistical likelihood of success. However the actual outcome is binary, in that the project will either succeed or not AND CANCEL
the projects are at a very carly stage and there is significant work to be andertaken to progress the projects, which may take longer and cost more than currently envisaged, the opposite may also awherear
if a project overcomes the technical and commercial burdles, the timing and quantum of the reyalties received are likely to vary from the projected reyalties, perhaps significantly

Deloitte: Zenyth Therapeutics Limited - Independent Expert's Report

n in La

for each of Zenyth's projects there are a number of other competing projects currently under development. If one of Zenyth's projects is technically successful, there may be a similar product which reaches the market earlier (flest mover advantage), or which may be more effective in treating patients. The opposite may also be true.

The Option Scheme is not fair

There are a series of nythms issued, each with different characteristics, and the offer price differs by series. We have formed our opinion on the fairness of the Option Scheme by considering Optionholders as a whole.

In order to assess whether the Option Scheme is fair, we have compared the fair market value of the Zenyth options to the value offered under the Option Scheme, as set out in the table below.

Valuation of share options

311233				Exembe Numberof Consideration e-Price Options underthe Assessed Expiry Date Price Options under the Assessed Option valuation 1983 - Alexandr Benedict Architecture (f. 1982)
Ì	14 November 2006	SO 73.	250,000	30. I I	SSR 12
Ž	30 November 2006	\$1.28	500.000	\$0.88	雞雞
Į.	30 November 2006	37.02	JUD.DIN	類辭	SA AT
4	13 December 2006	\$0,38	650,000	Sa oi	驗癖
ğ	23 Inchesty 2008	\$0.34	50.000	\$0.52	\$# 39
ł.	16 October 2007	\$0.84	200.000	\$0.06	WE 13
J	31 March 2009	\$0.84	349.650	\$0.12	\$8,22
攥	30 hme 2009	\$0.84	550.000	\$0.13	58.24
Ŷ	19 kanaary 2010	\$0.84	400.000	\$0.15	\$0.26
ΙÜ	30 June 2010	50.62	LOCALADO	50.34	50.33
İž	30 June 2011	\$0.62	200.000	\$0.56	30.36
12	30 June 2012	30.62	200.000	SA 39	53.38
13	30 June 2013	\$0.62	200.000	50.42	\$0.40
勝	30 June 2010	30.63	200,000	-50.34	588.33
	Total		5,749,650	\$891,486	\$1,0 65 ,962

Source: Delotte analysis

The consideration for some series of options is higher than our assessed value, whilm for other series, the consideration is below our assessed value, although the consideration provides at least an assessed intrinsic value for all series except one. Crecrall, as a whole, the total consideration is around 16% befow our assessed value.

As the value of the consideration offered for six of the series is less than our assessed valuation, it is our opinion that the Option Sobeme is not fair.

Delawan

The Proposal is reasonable and the Option Scheme is ressonable.

ASIC Policy Shaement 75 considers an offer to be reasonable if either:

the offer is fair
despite not being fair, but considering other significant factors, shareholders should accept the effer in the absence of any higher bid before the close of the offer.

As the Proposal is fair it is also rensonable. We have also considered the likely advantages and dissivantages to Shareholders of accepting the Presiosal.

We have also considered the reasonableness of the Option Scheme based on an analysis of the likely advantance and disadvantages to ention holders of accepting the Option Scheme.

Advantages

the consideration offered pursuant to the Proposal represents a significant premium to the Zenyth share price prior to the announcement on 17 July 2006. The consideration offered per Zenvth. share corresents:
a premium of 59% to the closing price for a Zenyth share on 14 July 2006 of \$0.54 (that closing price may include speculation of the Proposal)
a premium of 19% to the 30-day VWAP of \$9.48
a premium of 65% to the 90-day VWAP of \$0.52
the Option Scheme provides optionholders with an opportunity to realise a value for their options, the majority of which were "out of the money" prior to the announcement of the Proposal. As the optims are neither listed on a stock exclunge nor assignable tradeable, in the absence of the Option Scheme holders of options currently move limited opportunities to realise value for the entions
the Option Scheme, for all but one series of options (series 1), provides Optionholders with a value in excess of the intrinsic value of the options based on the value of a Zenyth share implied by the Proposal, intrinsic value represents the excess of the price of a Zenyth share under the Furness over the exercise price of the oution. The fashters of series 1 certions could achieve a better return by exercising their cotions and participating in the Proposal

Disadvantages

Sharcholders and Optionbolders may suffer an adverse cash flow impact through any capital gains tax or income tax payable on disposal of their Zenyth shares or options if the Proposal and Option Scheme are implemented. Shareholders and Optionholders should consult their tax advisers in relation to their personal eircumstances
under the Progosal and Option Scheme, Shareholders and Optionbolders will be limiting the benefit derived from any notential upside in the projects being pursued by Zenyth. Our valuation of Zenvih recognises the substantial risks associated with gre-chitical stage projects, however, if a pogeet does reach a commercial mage of development in famee years, the value of Zenyth is likely to be significantly enhanced, at a point in time, to a stage that may significantly exceed the valuation assigned to the shares in this report.

Conclusion on reasonablemess

The major disadvantage of the Proposal and the Option Scheme is that the Sharebolders and Ontionholders will lose the ability to numeipate in the large upside potential if a project, or a mumber of projects, are commercialised.

Deloitte: Zenyth Therageutics Limited – Independent Expert's Report

Delowe

In our view, this disadvantage is offset by the ability of a Shareholder and Ontionholder to realise the current potential in Zenyth's project pigetine, at a fair value, without undertaking the risks associated with maintaining an interest in the company.

The Option Scheme as a whole is not fair (as the value of the consideration offered for six of the series is less than our assessed valuation). As all but one series of Ontionholders are receiving a value in excess of the intrinsic value of the ontions, incorporating an element of time value, and as the Option Scherne grovides an apportunity to realise a value for the options which would otherwise be difficult to achieve, in our view, the Online Scheme is reasonable.

Opinion

In our opinion, the Proposal is thir and reasonable to Shareholders and it is therefore in the best interest of the Sharcholders. An individual Sharcholder's decision in relation to the Proposal may be influenced by his or her particular circumstances. If in doubt the shareholder should consult an independent adviser.

In our opinion, the Option Scheme is not fair but reasonable to Optionholders and on balance it is in the best interest of the Ontionholders. An individual Orginalater's decision in relation in the Ontion Scheme may be influenced by his or her nunicular circumstances. If in doubt the shareholder should consult an independent adviser.

This opinion should be read in conjunction with our detailed ceport which sets out our scope and ticulieus.

Yours faithfully DELOITTE CORPORATE FINANCE PTY LIMITED

Stephen Reid Director

MBLes

Hanklı Blair Director

Note: All annumis stated in this expart are Australian dollars unives otherwise stated and all manbers are subject to rounding.

Deltaa

ä.	Terms of the Proposal	鬚
Ì.	Summary	Ŷ,
12	CSL's intentions	8
13	Approval	8
1.4	Conditions of the Proposal	Q
I	Scope of the report	W
急走	Purpose of the report	ŧŐ
the Corp. The color	Basis of evaluation	頛
23	Limitations and reliance on information	ļ≵
Ï	Blotechaology industry	Ï3
3.1	Structure of industry	13
32	Critical success factors	22
3.3	Barriers to entry	萋萋
3.4	Regulation	鷹寨
$\mathbb{S}, \mathbb{S}$	Recent transactions	23
礶	Profile of Zenyth	龜
4.}	Company history	24
導定	Development projects	25
41	Development strategy	26
爆爆	Collaborations	28
黨、	Competitive position of Zenyth	29
屬縣	Capital structure and shareholders.	30
47	Share price performance	38
爆暴	Financial performance	31
滿頭	Financial position	34
Š.	Valuation methodology	35
Ã.	Vatuation methodologies	15
52	Selection of valuation methodologies	36
Ġ.	Valuation of Zenyth	37
ń. l	Valuation of Zenyth	37
6.2	The discounted cash flow method	37
6.3	Summary of valuation	艄

$\tilde{\mathbf{R}}$ Deloitte: Zeryth Therapenies Limited - Independent Expert's Report.

De Citat

0.4	Cross check - comparable transactions	42.
ÿ	Valuation of the aptions	43
7.1	Introduction	謀
72	Valuation inputs	43.
73	Valuation of the share options	44
摎	Evaluation and conclusion	46
8.1	Valuation of coasideration	48
黑急	Farness of the Proposal	游
8.3	Fairness of the Option Scheme	有点
8.4	Reasonableness	-47
85	Conclusion	-48

Appendices

Appendix E Clossary	49
Aggendix 2: Discount rate	Sł
Appendix 3: Comparable company descriptions	-60
Appendix 4: Comparable transactions	舂
Amendix 5: Acuity Report	Ő.
Appendix 6: Sources of information	77
Appendix 7: Qualifications, declarations and consents	78

$\ddot{\gamma}$ Deloitte: Zeryth Therapeuties Limited - Independent Expert's Report

Deloma

Terms of the Proposal 1

ĹÎ Summary

(In 17 July 2006, Zenyth and CSL automoced a proposal under which CSL would acquire 100% of the issued shares in Zenvth by way of a scheme of arrangement. The proposal will be inaxternanted by way of:

The Program I

a scheme of arrangement between Zenvih and its shareholders under which all Zenvih shares will be transferred to CSL for a cash payment of 82 cents per Zenyth share the Share Scheme)
a special peo-can distribution by Zenyth to its shareholders of all shares it holds in Aveva, representing approximately one Avexa share for each six Zenyth shares held (the Special Distribution).

The Ontion Scheme

a scheme of arrangement between Zenyth and its Optionholders under which all Zenyth conions will be cancelled in consideration for various amounts which vary for each option series.

The Special Distribution and the Option Scheme are conditional upon the Share Scheme being approved. However, the Share Scheme is not conditional upon the approval of the Seccial Distribution or the Ordina Scheme.

1.2 CSL's intentions

CSL management have stated that Zenyth's partfolio of pre-efinical research and development (R&D) projects are considered complementary to their existing R&D strategy. As such, the R&D projects currently being undertaken by Zenyth will be incorporated into CSL's existing R&D operations to enfunce the capabilities head within CSL.

$1.3$ Approval

The Share Scheme and Ontion Scheme will need to be annoyed at meetings of Zenyth Shareboåders and Cationholders respectively. Approval of the Share Scheme and Option Scharte remaires:

n majority of the Zeryth Shurefolders/Optionholders present and vecing at the meeting to vote in firesured the Share Scheme/Option Scheme
more than 75% of the total votes cast on the Share Scheme/Option Scheme to be cast in from of the Share Scheme/Ortion Scheme.

The Share Scheme and Ontion Scheme will also require the anoroval of the Supreme Court of Victoria.

The Special Distribution is conditional on the Share Scheme being approved, and requires the majority of votes cast by Zenyth Shareholders, present and voting, to be cast in favour of an ordinary resolution in relation the to the Special Distribution.

Delolite: Zenyth Therapeatics Limited -- Independent Expert's Report

Deidita

Conditions of the Proposal 14

The principal conditions of the Proposat can be summarised as follows:

the independent expert providing an opinion that the Share Scheme and the Special æ, Distribution are in the best interest of Zenyth Shareholders
Shareholder approval of the Share Scheme
approval from the Supreme Court of Victoria for the Share Scheme
no prohibitions, including restraining orders or injunctions, being issued by any court of ä competent jurisdiction or the Takeovers Panel
no Material Corporate Transaction, Mitterial Adverse Change or Prescribed Occurrence (as defined in the Merger Implementation Deed) arising in respect of Zenyth
that standard representations and warranties given by both parties are (mal remain) true and correct
conson being obtained from CSINO and Ludwig Institute for Camer Research for the novation or assignment of a collaboration agreement with Zenyth to CSL.

ů Debülle: Zeryth Therapeuths Limited -- Independent Expert's Report

Delotte

Scope of the report $\hat{\mathcal{T}}$

$2.1$ Purpose of the report

Section 411 of the Comoration. Act 2001 (Section 411) resulates schemes of arrangement between commutes and their shareholders. Part 3 of Schedule 8 of the Comorations Regulations 3901 (Cwith) (Part 3) reescribes the information to be snovided to shareholders in relation to schemes of arrangement. These provisions remains the preparation of a return by in inteneration expert stating whether or not, in the expect's cointent the proposed scheme is in the best interest of the shareholders of the commany subject to the scheme where either:

the corporation which is mary to the scheme (CSL) has a director in common with the company subject to the selteme of arrangement (Zenvili).
the corporation which is the other party to the scheme is entitled to more than 30% of the vains shares in the commany subject to the scheme.

As CSL does not bave any directors in common with Zenvth, and it does not have more than 30% of the votine shares in Zenyth, there is no legal requirement for an independent expert's report in respect of the Proposed Scheme. However, the Directors of Zenyth Inversequested is to prepare an independent expert's report on the Procussed Scharme, as if it was required tander Part 3, in order to assist abarchedders in their consideration of the Propesed Scheme.

$2.2$ Basis of evaluation

$2.2.1$ Guidance

Schemes of arrangement can include many different types of transactions and the basis of evaluation schoosed by the expert must be appropriate for the mature of each specific transuction. As there is no studutory or requisiony definition of the expression 'in the best interest' the interpretation is a matter of judgement for the expert, having regard to the mattre of the transaction and the gaidsuce available. In determining how to assess whether the Proposal and Outian Scheine is in the best interest of Shareholders or Outianholders we have considered the following guidance:

ASK Policy Statement 75

This policy statement provides suidance in relation to independent experi"s reports prepared in relation to:

related party takeover offers
related party schemes of arrangement
proposed acquisitions of mer-voting shares, commocable options and convertible notes following a sakcover.

The policy statement provides detailed guidance on the interpretation of the phrase "lair and reasonable' in the context of related party takeover offers, but does not provide guidance on the interretation of the almase 'in the best interest'.

In the context of takeover offers, the pulley statement separates the concerts of fairness and reasonableness. The policy statement defines a takeover offer as being fair if the value of the consideration is count to or greater than the value of the securities subject to the offer, with the assessment being made on the assumption of 100% ownership of the target company (i.e. including a control premium). The policy statement defines an offer as being removiable if citaer the offer is fair or despite not being fair shareholders should accept the offer in the absence of a higher bid before the close of the offer.

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Deloitte: Zenvil: Theancutics Limited - Independent Expert's Report

Dela Ba

ASHE Palley Statement 74

This policy statement relates to independent expert's reposts prepared in the existent of accuristives of shares in a company that must he aureed to by shareholders. This wination occurs where an individual shareholder acquires an interest in excess of 20% in the company without making a takeover offer. Independent expert's reports prepared in these circumstances are required to provide an opinion on whether the proposed transaction is 'fair and reasonable" to non-associated shareholders. ASIC notes in the noticy statement that the assessment of what is fair and ressonable in these circumstances is not as straightforward as in the circuststances discussed in Policy Statement 75. The policy statement does not provide a specific definition of the meaning of "fair and reasonable". However, it does contain the following asidance 'the report mast commer the likely advantance and disadvantance for the ton-associated shareholders if the grounded is screed to, with the advantages and disadvantages to those shareholders if it is not! The reliev statement also remires the exect! to state whether the aronsmed transaction 'may deter the making of a takeover hid for the company'.

Market practice

Schemes of arrangement frequently have the same effect as a takeover offer and are commonly evaluated as such. In these circumstances, the expression 'in the best interest' is commonly treated as being conjunion to "fair and reasonable" as defined in ASIC Policy Statement 75.

222 Bairness

ASIC Policy Statement 75 defines an offer as being fair if the value of the offer price is equal to or accater than the value of the securities being the subject of the offer. The communican must be made assuming 100% ownership of the innert company.

Accordingly, we have assessed whether the Proposal is fair by comparing the consideration offered with the value of a Zenyth share. We assessed the value of each Zenyth share by determining the current value of Zenyth as a whole and dividing this value by the number of shares on issue.

We have assessed whether the Ontion Scheme is fair by comparing the consideration offered with the value of a Zenvih cation.

The shires and options have been valued at fair market value, which we have defined as the marcant at which the shares or options would be expected to change hands between a knowledgeable willing bayer and a knowledgeable willing action, neither of whom is under any computsion to buy or sell. Special purchasers may be willing to puy higher grices, to reduce or eliminate connectition, to ensure a source of material sum or vales, or to achieve cost savings or other synergies arising on husiness combinations, which could only be enjoyed by the special purchaser. Our valuation of Zenyth has not been premised on the existence of a special purchaser.

$2.2.3$ Reasonablesess

ASIC Policy Statement 75 considers an offer to be reasonable if either:

the offer is fair
despite not being fair, but considering other significant factors, Shareholders should accept the offer in the absence of any bigher bid before the close of the offer.

To assess the reasonableness of the Proposal and the Option Scheme we have considered the following significant factors in addition to determining whether the Proposal and Option Scheme are fair:

Dektitus Zavet Therapeutes Limited -- Inderenden Exner's Report

Delowe a

the existing shareholding of CSL in Zenvth
ofter significant shareholding blacks in Zenvit
the likely mice and market hopidity of Zenyth shares and qutions in the absence of the Proposal and Option Scheme
the likefibood of an alternative Progressi and Option Scheme
other imagications for shareholders of rejecting the Promosal and Ortion Scheme.

$2.2.4$ Individual circumstamees

We have evaluated the Proposal and Option Scheme for Shareholders and Optiopholders as a whole and have not considered the effect of the Progrosal and Option Scheme on the particular circumsumes of individual havesters. The to their maticular circumstances, individual investors may place a different emphasis on various aspects of the Proposal and Ontion Scheme from the one adopted in this report. Accordingly, individuals may reach different condusions to ours on whether the Pregoesi and Option Scheme are tair and reasonable. If in dads investors should consult an independent adviser.

$2.3$ Limitations and reliance on information

The opinion of Defoitte is based on economic, market and other conditions prevailing at the date of this report. Such conditions can change significantly sver relatively short periods of time. This separt should be read in conjunction with the declarations outlined in Appendix 7.

Our procedures and enquiries do not include verification work nor constitute an audit in accordance with Australian Auditing Standards (AUS), nor do they constitute a review in accordance with AUS 902 applicable to review engagements.

$+2$ Deloitte: Zeayth Therapeutics Limited -- Independent Expert's Report

Delote

Biotechnology industry Ť

Zenyth operates in the biotechnology industry developing therapeutic antibodies and other biotherapeutics for the treatment of inflammation and cancer. In the following sections we provide a brief outline of the biotechrology industry, specifically in relation to inflammatory conditions (asthma and rhermatoid arthritis) and cancer on which Zenyth's R&D of antibodies is focussed.

$3.1$ Structure of industry

General

The primary activities of companies within the bioacchnology industry include:

recombinant Denxyribonscloic scal (DNA) or genetic engineering
protein development and engineering
antibody development and engineering.
cell and tissue culture engineering
mocess biotechnologies
small molecule drug discovery.

The biotechnology sector, in which Zenyth is a player, has a number of muior industry players that account for approximately 75% of all drugs in the market. A large number of amall to medium sized enterprises also compete in this industry focussing on particular platforms or disense niches. Biotechnology comments exist to develop drags, however, yery few actually go on to sell these drugs to end consumers. Biotechnology companies are either unsuccessful in developing an effective drug, or if successful, licence out their drugs to large multinational pharmaceutical companies which have a presonce in the marketplace. It is also common for biotechnology companies to partner with large plurmaceutical companies to co-fund drug development in return for milessone payments and royalties once these products reach the market.

We set out below the mornal states of development for a new drug together with the necessary clinical trials. The development of biological drugs, such as amihodies, is generally similar to the stages cantined below:

Deloitte

Figure 1: Stacks of study required

Stage	Pescription
Discovery	The process by which now molecular entities (NME) are identified.
	Processes aimed at discovering a malecule that will excrt a particular effect are undertaken, followed by a process of optimising. the structure of the compound to achieve proporties of greater activity and specificity as well as desirable physico-chemical conduction
	A significant amount of effort is applied to develop concepts for synthesising variants on the original discovery molecule. Many such entities are absorbaned at this stage
Validation	Verification that a lead comgound has the appropriate effect in- laboutory tests (in vitro) and in minul models (in vivo) of the discase to which it is targeted
Preclinical	The NME is severned for pharmacological activity and toxicity in an artificial environment and then in animals under strictly defined conditions to show that it is safe enough for first administration to bamzne
	If the NME is a promising candidate for further development, the ۳'n company files an application for approval to conduct human studies with the regulatory authorities or, as the othen the case in Australia, a hospital ethics consmittee
	In the United States of America (US), an Investigational New Drug application is lodged with the US Food and Drug Administration (FDA).
Phna i	Testing is generally conducted in a small number of (usually bealthy) volumeers to obtain information on toxicity and safe dosing ranges in hamans
	Data is also collected on a novel drug's absorption and distribution in the body, its metabolic effects, and the rate and manner in which the drug is eliminated from the body
	it is often the case with a cancer drug, that healthy cells are injured, bance adverse events may result. Such drugs are often first administered to cancer patients as it would be uncthical to give them to healthy individuals
Phase II	The treatment is administered to a larger number of individuals ä selected from among patients for whom the drug is interaled.
	Successful ghase H trais provide significant evidence on efficacy ä. and additional data on safety and dosage level
	Final product specification and manufacturing grocess are generally finalised at this stage

$\frac{3}{2}$ ).

Doloitte: Zenyth Therapeutics Limited - Independent Expert's Report

Source: Aculty report

童魔 Detoilin: Zerych Therapeutics Limited -- Independent Expert's Report

Deinin

Relevant medifon! conditions

The following section provides an overview of the medical conditions anticipated to be trented by antibodies developed by Zenvih.

Asthma

Asthma is a chronic disease caused by inflammation of the air pastages (making it difficult to breather when exposed to certain trianers. The cause of asthron is not known, nor is there a cure, however adding is a condition which can be largely managed by various medications, mosty inhated. Of the estimated 300 million people worldwide affected by asthma,¹ up to 10% suffer from a severe persistent form of the disease, which is inadequately controlled by current treatments, and it is this patient population which is one of the targets for therapeutics being developed by Zenyth. The majority of asthma cases are developed in early childhood.

The table below sets out the relative acrocatage of the astlana sufferers to the acronisticus of the US need over 18 years in 2002 that have ever been or currently are disamosed with asiaran.

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, Titulian manasa m 1988 - Andrew Barbara, Amerikaansk politiker († 1958)	that has ever the currently has that a strength of the strength of the strength of the strength of the strengt In the strength of the strength of the strength of the strength of the strength of the strength of the strengt	Population In Reputation that
Total population	10.6%	春膠絲
Femaie	9.2%	5.8%
Male	【完建%	暴津海
$18 - 44$ years	11.5%	春海海
45 - 64 years	地形	7.1%
$65$ - $74$ years	8.4%	我想笨
75 years and over	7.6%	5.3%

Table 1: Prevalence of asthma in the US in 2002

Source: US Department of Health and Human Resources - Vital and Health Statistics Number 222

Note 1: Based on a population of 205.8 million

The global market for asthma therapies was estimated to be approximately USS (1.5 billion in 2003, and is expected to grow rapidly as the incidence of the disease increases. The increased incidence combined with usage of higher griced therapics suggests the global asthma market could grow by 8.9% per annum, to US\$20.9 billion, in 2010. $^\circ$

it is considered that combination preducts will contribute to the main fly of asthma therapics in the corring years. This compures with a decline in the use of corticosteroids as concern grows over the adverse side-effects with long term usage of corticosteroids.

宇義

Deloitte: Zanyth Theangaries Limited -- Independent Expert's Report

^<sup>3 Medical Research Institute of New Zeniand, 2003

^<sup>2 ING Firancial Markets Phasmaceuticals Sector Review, 2004

Taloga

Rhemmatoirt arthritis

Arthritis is a major cause of disability and chronic nain of which rheumatoid arthritis. osteoarthritis and goan account for more than 95% of all articleic cases. Rheumatoid arthritis is an auto-irrenune discuse in which inflammation affects the inints and at times, other organs of the body. Rhemanoid arthritis affects prople of all ages, sexes, races and ethnic groups, however is most prevalent in famales. The cause of meunanoid arthritic has not been discovered tax is there a cure. However, if diagnosed early, theumatoid artitritis can be effectively controlled and managed.

Approximately 1% to 2% of the world population is estimated to suffer from rheumateles arbitis, with 1 in 3 sufferers likely to become disubled within 20 years.³ The US loses about US\$116 billion, approximately 1.4% of US gross demestic predact, in gredical care and indirect costs every year because of arthritis. (M this, US\$51.1 billion is in direct medical expenses. The most common type of articulus is osteogrificitie, affecting more than 16 million Americans. Rheumatoid articleis affects 2.5 million Americans with only about 68% of patients (or 1.7 million patients) diagnosed with the condition. Of the diagnosed patient population, only 60% (or 1 million) are actually treated with pharmaceutical therapies for the ្ត
សេរី ខេត្ត សេង អ

The table helow sets out the anticipated prevalence of artiritic conditions by age profile in the ĐS.

	والمستحقق والمستقرق والمستقرق والمستقرق والمستقرق والمستحدث والمستحدث والمنافذ والمنافذ والمتحدث والمتحدث والمتحدث	Combatt: Eng SILIAL AND STATE E ZA LA LA LA LA LA
Total pagulation		20.9%
hänke		撑腿靠
Partiste		21.7%
18-44 years		$7.8\%$
45-64 years.		28.8%
43-74 years		春中真の合
75 years and over		51.ZW

Table 2: Prevalence of arthritis in the US population in 2002

Source: US Department of Health and Human Resources -- Vital and Health Statistics Mumber 222

The symptoms of arthettia and other rheumatold conditions may be contralled by a number of prescription drugs, over the counter pain reflet products and supplements.

To manage the symptoms caused by rhoumatoid arthritis, patients have typically been treated with non-steroidal anti-inflammatory drugs (NSAII)s), however, these have been dramatically surmased by the cyclosxyggnase inhibitors. In addition, some patients are also given disease modified anti-cheamatoid drags (DMARDs), which are designed to reduce the rate of joint destruction.¹ These DMARDs include the successful turnous-necrosis factor inhibitors (anti-

⁴ Zenyth Therapentics research

重發

Deloitte: Zenyth Therapeuios Limited -- Independent Expert's Report

^<sup>1Nature, January 2005

Debora

TNF therapy), which generated more than US\$4 hillion in sales in 2003. The market for TNF inhibitors is expected to increase to US\$7 billion by 2007, as approximately 30% of moderate-to-severe patients are projected to be receiving anti-TNF therapy, in addition to increased numbers of mildsto-moderate patients."

$\frac{1}{2}$

Deloitte: Zeryth Therapeutics Limited -- Independent Expert's Report

$^\circ$ Nature, Jamary 2005

Delo II di

Cancer

Cancer generally occurs where abnormal cells grow rapidly, spreading throughout the body in an uncontrolled manner. These cancerous cells can destroy surrounding tissue and spread to distant parts of the body. Cancer is generally most prevalent in older age groups.

In the US, cancer is a leading cause of death, which according to the American Cancer Society accounted for 22.7% of all deaths in the US. second only to heart diseases. The table below sets out the miniter of cancer incidence in the US in 2002, for the nopulation over the age of 18.

Table 3: Estimated US Cancer Cases and Deaths in the US in 2008 ......................................

		Milan Base
Total cancer incidence	720.280	679,510
Made ap off.
Prestate	13%	÷
Breast	$< 1\%$	31%
Ling & limelies	13%	12%
Colon & rectum	no.	打懸
(Riser	44%	4686

Source: American Cancer Society

In comparison, Australia has a Iower incidence of cancer cases than North America, but higher than Eusepe.

As the following table indicates, the market for cancer treatment drugs is projected to increase from around US\$23 billion in 2004 to over US\$49 billion in 2009, as new tangeted therapics. which offer a clear clinical advantage, become available.

Table 4: World market for anti-cancer treatments

	--------------------------------------						2004 2005 2006 2007 2008 2009 CAGR ^*
Cytotoxic agents	94	膠族	12.6	【集系	孫長井	18.1	13.5%
Harman therapy	ΧQ	薇林	93	8.1	番肠	90	8.9%
Monaclonal antibodies.	Χũ	税基	篆彦	10 J	红灯	129	20.9%
Other imgeted therapies	23	應募	4.0	3.4	学习	92	31.3%
World market	22.S	26.9	31.7	39.2	議連講	49.3	毛疙瘩等症

Soure: IXIS Securities Pharmaceuleals Sector Report, 5 April 2005

Note 1: Compound armual growth rate

Note 2: 'e" represents estimated

变变

Detaille: Zaryd: Theranculas Limited -- Independent Expert's Report

Delawa

Generally, most cancer beatments cost in excess of US\$10,000 per course. This includes newer treatments such as ImCleme's Erbatis^* for colon cancer which costs US\$17,000 a month and Avastin^* which costs US\$4.400 a month. Zevalin for a rare form of lymphoma costs US\$24,000 a month. Hercegtin casts over US\$35.000 per course.

$3.2$ Critical guerres factors

Key success factors within the industry include:

abity to raise investment funding, whether it be private, mabic offers or government erants.
approval by regulatory agencies to conduct clinical trials and give approval to market the drua
access to, and retention of, highly trained employees with the required level of experience and training
use of new technology, including access to the latest research and findings
a market need, generally defined as a medical condition which is poorly or inadequately mated
supely and distribution channels, or access to partners with these capabilities, when the drug is commercialised
development of products with benefits over available therapies...

33 Barriers to entry

The majority of small companies in the global biotechnology industry focus on the R&D of a small number of dangs or drugs deriving from a single platform technology. Revenues are generally then generated through milestones and royalties which they receive when the technology is licensed out.

This suggests that burriers to entry to this industry should be considered to be high, as companies require access to and expenditure on:

specialist staff with the relevant research skills and knowledge
buildings and specialist equipment
existence of patents to protect intellectual property.

There are areas of R&03 that may be considered politically sensitive, such as stem cell research. As such, R&D is often subject to government regulation, which is discussed further in the following section.

Regulation 3.4

$3.4.1$ 115

Rezulation within the biotechnology industry in the US is governed by the US FDA, a federal agency operated by the US Department of Health and Human Services.

The role of the FDA within the biotechnology and abarmaceutical industry is to ensure that buming and veterinary drugs, hiological moducts, and meckeal devices are safe and effective, In order to achieve this, the FDA:

警

Deloilte: Zenyth Therapeuios Limited -- Independent Expert's Report

Dela William

establishes licenses for new products and manufacturing processes
cases testing methods for research to establish new moducts is conducted within set standards
sets unidefines for the annoyed process for now products prior to being sold to the market.

$3.4.2$ Australia

Resulation within the biotechnology industry in Australia is driven by ethical, safety and environmental issues and as a result there is a high level of industry regulation over R&D practices. When a product reaches a commercial stage, regulation is covered by the Commonwealth Therapeutic Goods Act 1989 and the Therapeutics Goods Administration oversers a range of assessment and monitoring netivities to ensure therapeutic goods available in Australia are of an acceptable standard.

35 Recent transactions

Significant recent transactions in the Australian biotechnology sector include:

the raising of approximately \$31 million by Biota Holdings Limited (Biota) in October 2005 theorgh a share meetane plan. Hash is no Austrilian based untreiral drug Assekament company
November 2005, Pharmaxis, a pharmacentical company focusaed on R&D and commercialization of homen therogentic products, amounced a adobal stare issue, which misse more than \$87 million in gross proceeds
in hine 2006 Cytopia Limited signed a contract with Novartis Group (Novartis) for a joint drag development dati, whereby Novartis would provide \$13 million over three years for RAD. The overall deal is estimated to be worth \$387 million if the drugs reach the stage of commercialisation. The products to be developed are airred at the transplantation and aubwmmuse disease markets.

International transactions in the hiotechrology industry include the following:

Novartis announced an offer to acquire all the ordinary share capital of NeuTec Plaarna. Pic on 7 hme 2006 for GB£10.50 per share, which valued the existing share capital of NetTe: Phorns Pk at approximately GBC350.1 million
AstraZencea announced an offer for the remaining 80.8% interest in Cambridge Antibody Tachnology's ordinary shares on 15 May 2006 which is did not already nwn. AstraZencea's offer was for GBL13.20 in each per share, an implied total company valantion of GOPETO2 million
Amger announced an offer for all the outstanding ordinary shares of Abgenix for for US\$22.50 in eash per share on 14 December 2005, an acquisition value of US\$2.2 billion in cash and daht. The acquisition was approved by regulatory authorities and became effective in April 2006
GlaxoSmithKšine announced an offer for all the outstanding ordinary shares of Corixa Corporation on 29 April 2005. GlasoSmithKline's offer was for US\$4.40 cash per share, representing a total value of approximately 1/88340 million. The transaction was approved by Corixa Corporation's shareholders and regulatory authorities and became effective in July 2005.

Further details of these almore transactions are provided in Appendix 4.

$\mathcal{T}$ .

Deloitte: Zarrth Therapeutics Limited -- Independent Camer's Report

De Lite

Profile of Zenyth $\Delta$

Company history $4.1$

Zenyth was founded in 1986, as Amrad Corporation Limited (Amrad) following the receipt of \$14 million in seed capital from the Victoria Investment Corporation, a Victorian State Government investment group. Armad was set up as a research consertium to develop commercial products arising from Australia's medical research. Significant member institutes included the Walter and Eliza Hall Institute, the Baker Medical Research Institute, the Howard Florey Institute and the McFarlane Burnett Institute.

A brief overview of the company history, as pertaining to its current operations, is provided in Figure 4 below.

	Figure 4: Company history
		Significant member institutes included the Walter and Eliza Hall Institute, the Baker Medical Research Institute, the Howard Florey Institute and the McFarlane Bernett Institute, with the Victorian

		The Company catered into a cross-licensing arrangement with the Ludwig fastitute for Cancer Research in respect of their VEGF-B
		The Company refocused on its core strengths in pharmaceutical R&D through the safe of ICT Diagnostics Limited, Amrad Hintech

		haman menoclonal antibedy therapeutics targeting GM-CSFA with
		Completion of a soccessful institutional placement of 15.5 million
		Ameanced a licensing partnership with Medarex Inc. (Medarex)
		Sale of the Company's premises at Richmond for \$47.5 million
		Ameanced exclusive firensing and collaboration agreement with
		antibody-based therapics in the areas of inflammation and cancer
		Collaboration agreement on VEGF-9 with the Ludwig Institute for
2005	寠	Name change to Zenyth Theragenties Limited

De kritte: Zanych Theopenics Linited -- Independent Expect's Report

$4.2$ Development projects

We describe briefly below each of Zenyth's current major R&D projects.

H.-13 Receptor Antibody

Zervih is developing monoclonal autibadies which taugh the interleakin-13 receptor of subunit as a redential treatment for autumn. The reneed (BL-13R) is based on the discovery of the fit. 13 receptor by Walter & Eliza Hall Institute researchers in a collaboration that involved the Cosperative Research Centre for Cellular Growth Factors (CRC-CGF) and currently operates under a partnership with Merck & Co., Inc. (Merck). Under the partnership arrangement Merck is registrative for all clinical development and marketing. As such. Zenyth will hour no further development casts and will receive certain mitestone payments and royalties.

The project is currently at the pre-elinical development stage and is expected to enter the clinic in the continu wast.

It is also believed that there are potential applications for H.-13R in treating several other respiratory discuses, including Chronic Obstructive Pulmonary Discuse, a chronic lung discuse, as well as a potential treatment for cancer.

GM-CSF Receptor Antibody

Zanyih, in a 50/50 com/readit pertuarabin with CAT, is developing a fully human antibody tarretina the aranulocyte-mocranhave colony stimulatina factor receptor ulpha suburit (GM-CSFR). Corrent studies are focussed on using the OM-CSFR antibody for treatment of rheumatoid arduidis. however there is scientific evidence to suggest a patential theraneutic role for GM-CSFR antibody theranies in other inflummatory diseases such as COFD and asthma. In rheursmost arthritis, a GMACNFR unibody is considered to have the potential to tareet patients that have not experienced henefit with current biological therapies which target nati-tumon necasis factor (anti-TNF), being approximately 30%-50% of total patients breates.

The project is currently at the pre-climical development stane, and is expected to enter the clinic in 2007. Zenvih intends to develop the project through to completion of Phase 11 stanfies with CAT.

In June 2006, AstroZeneca acquired CAT shares, following which CAT became a subsidiary of the AstraZeneca group of companies. While AstraZeneca's intentions with regard to the GM-CSF project have not been amounced, interest in the project from AstraZeneca may offer potential expertunities for the development of the project beyond Phase II trials.

今菊 Delütte: Zervik Therapeutics Limited -- Inderendent Expert's Report

Delowa

G-CSF Antagonists

Zenvih and MariCien Theraneutics are initaty developing theraneutic samanarists of G-CSF. The cost sharing agreement warrates through to completion of the woof-of-concent stage in homan clinical trials, after which a licensee will be sought. Antagonists of G-CSF have potential agatications in the treatment of inflammatory diseases such as rheumstaki arthritis and Chronic Obstructive Pulmonary Disease. O-CSF levels correlate with disease activity, morning stiffness and swollen könts in rhoumatoid arthritis patients. The G-CSF antagonists inhibit binding of G-CSF to its receptor.

VECF-8 Anthody

The Vascular Endothelial Growth Factor (VEGF) family of cytokines have been shown to play various raics in generating new bland vessels and increasing blood flow. Zenyth is collaborating with the Ludwig Institute for Cancer Research to develop antibody inhibitors of VEGF-B. A VEGF-II antibody may have material use in the treatment of both cheanagoid arthritis and cancer.

$4.3$ Development strategy

The figure below outlines the development stages that Zenyth projects, and biotechnology company projects in agneral, underno and the associated revenue streams if such projects are ficensed to third parties. It also outlines a potential development process and the stage within the process that each of Zenyth's current projects sits.

$\mathcal{Z}_\mathrm{B}$ Detoitte: Zervel: Theranculies Limited -- Independent Expert's Report

The figure below highlicated and young of development of the curval projects.

De lo de

$\overline{4}$ , $\overline{4}$ Collaborations

Alerek

Zenyth commenced collaboration with Merck in June 2003 in relation to an exclusive ficensing and research project to develop agribodies nineed at targeting H.-13R. Merck is a New York Stock Exchange (NYSE) listed pharmaceutical manufacturing and research company, and is one of the world's beading pharmaceutical companies with global operations.

$4^{\circ}43^{\circ}$

CAT is a biopharmscentical company, based in Cambridge UK, with a focus on the development of human monoclonal antibody therapeutics. CAT is collaborating with Zeryth to ca-develop a OM-OSF receptor antibody. The collaboration is based on a 50(50 cost/profit sectoceshio...

In June 2006, AstraZensca acquired CAT, following which CAT became a subsidiary of the AstraZenzea group of enriquaties.

AstraZeneca

AstraZenesa is tri-listed on the London Stack Exchange (LSE), NYSE and the Stockholm Stock Exclumac (OMX). The company was formed in 1999 following the merger of Swedish based Astra AB and UK hased Zeneca Groug pic, The company has a wide range of products in the sakes and marketing stage as well as substantial R&D projects.

MuriCen Thernootks

MuriGen is a private Australian based drug R&D company established by the Walter nod Eliza Hall Institute of Medical research and a number of leading Asstralian scientists. The company has a namber of projects at the discovery stage. MuriCien will jointly fund with Zenyth, the R&D of therapeutics which target G-CSF through to proof-of-concept in humans.

Medarex Inc.

Medarex is traded in the over-the-counter markets, including in the Nandaq National Market. The company is a biopharmaceutical company currenty involved in RAD on human antibody based therapeutics. The company has licensed to Zenyth its UltiMAb® human antibody technology for use in specific projects.

Dyas Corporation

Dyax faceses on R&D into biotherspeatics related to cancer and inflammatory indications and is traded on Nasdaq. The company has a phage display (a tool used in protein engineering) antibody library licence agreement with Zenvth.

雪突

Deloitte: Zenyth Therapeutics Limited -- Indeperdent Expert's Report

DATIEL

Competitive position of Zenyth 45

The table below sets out the strengths, weaknesses, opportunities and threats (SWOT) for Zenyth.

Table 5: SWOT analysis

steeribs - The Local Property We
Four lead projects, all currently in pre- clinical stage Existing partnerships, including with Merch. on 11.-13R project whereby responsibility for development costs iny with Merck and with CAT and MuriCers on a cost share basis for the GM-CSFR and G-CSF projects respectively, reducing financial commitments to develop products Strangie relationships with Medarex and Dyax for use of existing technologies and knowledge Lurge current cash balance which will provide the capacity to fund the Company's developments for the near term Intellectual Property rights to a number of malecules with patential application in cancer and inflammatory diseases including rhemanid arthein mi astma Focus on antibody based therapeutics which provides Zenyth with a strong market niche	Existence of five major shareholders, regresenting 63% of total shareholding, could potentially have conflicting interests relating to their investment preferences Early suge of development of lead W projects High upfront development risk while ÷ progressing to becosing stage Uscalating costs of development as development of lead projects proceeds
aitecti	Crootusties (IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII
Uncertainty relating to future collaboration with CAT following its acquisition by Astaličnom Competing technologies from other companies may reach the narket first, sadar be more effective Ability of MuriGen to fund its init of the G- CSF project	Use of Merck's established safes and marketing routes if the IL-13R project nivences to a commercinitantem Licence with Merck represents a potential \$U\$112 milkon of milestone payments plus royalties (\$U\$16.5 million received to ršate i Current market for astbura treatment drugs have been valued at up to US\$10 billion. per annum and the rheumatoid arthritis market at US\$4 billion Rapid acceptance of antihodies us a

20

Deloitte: Zenyth Thempeatics Limited -- Independent Expert's Report

IAN LI

Capital structure and shareholders 4.6

As at the date of this report, Zenyth had the following securities on Issue:

125,176,327 ordinary shares. $\bullet$
6,249,650 entions to acquire ordinary shares at various prices. $\bullet$

As at 26 July 2006, Zenyth's top ten shareholders were as follows:

Table 6: Zenvih's too shareholders (26 July 2006)

aan araan inti dadka saaraa maalaa maalaa maan ah ah ah ah ah ah ah ah ah ah ah ah ah
Mo of shareholders (1990) Mo of shares (1990)
Fibre Opties (Auss) Pty Limited'	28.365	22.58
State Trustees Limited	19,744	13.77
Invia Custodian Pry Limited ²	猛馬	植物
Quensland Investment Corporation	8.073	6.43
R.I Custudians Pty Limited ²	5,345	4.27
Citicarp Nominees Pty Limited	4.235	3.38
Merck Sharp & Dalmac (Australia) Pty Lisnited	1.636	2.90
Westpac Custodians Norninees Limited	2.056	8.64
UBS Nominees Pty Limited	1,526	13
The Walter and Eliza Hall Institute of Medical Research	LOO	0.80
Top 10 sharcholders	90.639	72.30
Öther sharchalders	34.542	27.61
Total	125,176	106.60

Source: Zerryth
Note 1: A subsidiary of Circadian Technologies Limited
Note 2: A nomines of Thomey Pty Limited

省自 Deloitte: Zeavth Therageutics Limited -- Independent Expert's Report

Deioite

Share price performance $4.7$

A summary of Zenyth's share price performance is summarised in the table below.

			Table 7: Zenyth quarterly share price information.

			rarter end
			$\mathfrak{B}$ and ${\mathfrak{B}}$ and ${\mathfrak{B}}$ and ${\mathfrak{B}}$ and ${\mathfrak{B}}$ and ${\mathfrak{B}}$ and ${\mathfrak{B}}$ and ${\mathfrak{B}}$ and ${\mathfrak{B}}$ and ${\mathfrak{B}}$ and ${\mathfrak{B}}$ and ${\mathfrak{B}}$ and ${\mathfrak{B}}$ and ${\mathfrak{B}}$ and
Manda 2004	我写3	U.62	Ü. 71	6.29
June 2004	0.91	稳感%	0.64	15.62
September 2004	0.66.	穆丹	0.47	15.40
December 2004	0.5%	稳重症	U.49	學濟之
March 2003	0.56	稳稳	0.41	3.72
$Jame$ $3805$	簇属者	绕38	0.42	3.23
September 2005	0.53	穩薄	0.45	情願
December 2008	0.35	鏡展	0.48	2.82
March 2006	我感?	8.45	0.53	7.74
June 2006	真意妙	卷尾	0.47	2.96
1 July – 14 July 2006	9.54	後年	0.54	《三町

Source: Bloomberg

$31$ Deloitte: Zenyth Therapeatics Länited -- Independent Expert's Report Share price movements and trading velonas are presented greaterally in the figure helaw. The clast highlights that shares in Zenyth ore very thinly tradied.

Deloite

Financial performance 4.8

The indited financial results of Zenyth for the two years ended 30 June 2006 are summarised in the table below.

Table 6: Financial performance

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,我们的人们的人们的人们的人们的人们的人们的人们的人们的人们的人们的人们的人们的人们	,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
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Licence fee and royalty income	8,300	4.153
Other revenues from ordinary activities	2.304	1.123
	\$ , h的4	5,276
Changes in fair value of investments	3.294	在群落
Licence fee and royalty payments	(1.149)	(1,207)
Contract R&D costs	64.1575	14,9131
Personnel expenses excluding share-based yet visitezits.	(4.494)	(4,491)
Share-based payment expense	(134)	(145)
Finance costs.	(175)	(22)
(kher expenses	(4.282)	14.2793
Depreciation and anontisation	(医薬師)	1663)
Net profit / (boss) before tax	(1.AS3)	14.429)
Loss of discontinued operation, net of tax	67231

Source: 2005 and 2006 Annual report

The low keel of revenues, which are derived principally from interest and investment receipts mat milestame payments, reflects the carly stage of development of Zenyth's projects.

These revenues are offset by the costs relating to R&D and nersymel, which is consistent with the labour intensive rature of R&D.

Den 14

financial position $4.9$

The matited balance sheet of Zeryth as at 30 June 2005 and 30 June 2006 are summarised in the table below.

Table 9: Financial position

Maria Alemania 30 Jun 2005 - 30 Jun 2006 Austited Audited S'0001 - 15'0001 - 15'0001		MARINE AND ANNUAL AND ANNUAL AND ANNUAL
Cash and investments.	\$1,727	-85.753
Receivables	335	獅子
Investments - Avexa		다. 음녀대
Ultimer	150	344
Total current assets	51,212	51.048

Property, plant and equipment	1.173	1495
Ræersbles	博学	歸罪
Investments - Avesn	3.864
Total non-current assets	4,424	机刷刷
Tatul assets	新石油	52.648

Payables	1.567	2.359
Chher	1.316	SM4
Total current liahilities	2.1313	3,139
Other	100	बंध
Total non-corrent bahilities	100	-44
Total linklifties	2.993	1.279

Net assets.	53.653	49, 169
Net assets per Zenyib share	\$81.43	50 30

Source: 2005 and 2006 Annual report

Cash

The major balance within the net asset position is made up of cash and eash investments. Cash was generated primarily through the sale and subsequent leaseback of Zenyth's premises at Richmond in the 2003 financial year. Cash consumption during the year ended 30 June 2006 was about \$6.0 million.

The cash and investments relate to cash in bank and funds under management.

Other assets

Other than plant, property and equipment, the major other asset held by Zenyth is the investment in Avexa.

$\mathfrak{J} \mathfrak{g}$

Deloitte: Zenyth Therapeutics Limited -- Independent Expert's Report

Delnika

Valuation methodology 霉

4. Valuation methodologies

To estimate the fair market value of Zenyth we have considered common market practice and the valuation methodologies recommended by ASIC Proctice Note 43 regarding valuation reports of independent experts. These are discussed below.

微言语 Ažartart hmani manihurta

Market based methods estimate a company's lair market value by considering the market. price of transactions in its shares or the market value of comparable companies. Market based methods include:

capitalisation of maintainable earnings
amilysis of a campany's recent share trading history
industry specific methods.

The capitalisation of maimainable earnings method estimates fair market value based on the company's fature maintainable carnings and an appropriate carnings making. An appropriate carnings multiple is derived from masket transactions involving comparable companies. The capitalisation of maintainable carrings method is appropriate where the company's carnings are relatively stable.

The most recent share trading fisiony provides evalence of the fair market value of the share in a company where they are publicly traded in an informed and liquid market.

Industry specific methods estimate market value using rules of thumb for a meticular industry. Generally rules of thumb provide less persuasive evidence of the market value of a company that other valuation methods because they may not account for contpany specific diamont.

$5.1.2$ Disconsulted casts flow methods.

Discounted cash flaw methods estimate market value by discounting a company's future cash flows to a net present value. These methods are appropriate where a projection of future cash flows can be made with a reasonable degree of confidence. Descounted cash flow methods are commonly used to value early stage companies or projects with a finite life.

S.I.3 Asset hased methods

Asset based methods estimate the market value of a company's shares based on the realisable value of its identifiable net assets. Asset based methods include:

orderly realisation of assets method
itanidation of assets method
net assets on a going concert basis.

The orderly realisation of assets method estimates fair market value by determining the araount that would be distributed to shareholders, after payment of all habilities including reuffantion costs and taxation characs that arise, ussuming the contrain is wound up in an orderly manner.

$2%$ Deloitte: Zenvil: Therapeutics Limited -- Independent Expert's Report

Deloma

The liquidation method is similar to the orderly realisation of assets method except the liquidation method assumes the assets are sold in a shorter time frame. Since wind up or liquidation of the company may not be contemplated, these methods in their strictest form tany not necessarily be appropriate. The run nesets on a going concern basis method estimates the market values of the net assets of a company but does not take account of realisation errete

These asset based methods ignore the possibility that the company's value could exceed the realisable value of its assets as they ignore the value of intangible assets such as customer lists, management, supply arrangements and goudwill. Asset based methods are appromiste when community are not profitable, a significant proportion of a company's assets are liquid, or for asset bolding corresmics.

47 Selection of valuation methodologies

We are of the opinion that the most appropriate methodology to value Zenyth is the discounted cash flow method, due to the following factors:

Zenyth's management have prepared long term cash flow forecasts
Zenyth's projects are at an early stage in development usele
there is significant risk associated with the bleftbood of success at each stage of the projects progression, which can only be adequately reflected by probability weighting the cash flows associated with each moised
if the arolects continue to the clinical trial stage, significant expenditure will be recallred by Zarvik, or say concerted partner, it the fisture.

In addition, we have also used recent share market trading and comparable transactions to provide additional evidence of the fair market value of Zeayth.

Zergih has a surples asset, being an investment in 21.1 million shares in Avexa. If the Special Distribution is approved, shareholders will receive sparoximately one Avesa share for every six Zenyth shares bold. We have adopted 24 cents as the value of each Avexa share, being the volume weighted average price for 30 days prior to the announcement. We note that, as the Avesa shires will be distributed to Zenvih shareholders if the Proposal and Special Distribution are amonyed, the fairness of the Proposal is not sensitive to the value of no Avesa share, as the value of the consideration relating to the Avesa shares and valuation of the Avexa shares to be distributed will match. A value of 24 cours per Avexa share, and the entitlement of approximately one Avexa share for every six Zenyth shares held implies the Special Distribution reflects a value of around 4 cents per Zenvth share.

微微 Deloitte: Zanvit Therapeuios Limited -- Independent Experis Report

Delawe

Valuation of Zenvih ň.

ń. Valuation of Zenvih

Deloire has estimated the fair market value of a Zorysh share, including Zorysh's interest in Avexa, to be in the range of \$0.77 to \$0.98 on a control basis.

For the particle of our epithon fair market value is defined as the amount at which the shares would change hands between a knowledgeable willing buyer and a knowledgeable willing seller, neither being under a computsion to buy or self. We have not considered special value in this assessment.

In determining this amount, we estimated the fair market value of Zeryth using the following rencebander

the discounted cash flow method
amiyas of recent share trading and recent transactions.

These are discussed in sections 6.2 and 6.4 respectively.

62 Tion discription can firm musicion

The discounted cash flow method estimates market value by discounting a connecty's future cash three to their net present value. To value Zenvih using the discounted cash flow usettivit requires the determination of the followings.

expected fisture cash flows.
an appropriate discount rate to be applied to the cash flows
an estimate of the terminal value
the level of net debt / cash outstinding.

Our considerations on each of these factors are presented below.

6.2.1 Future cash flows

Delaitte engaged a biotechnology technical expert. A calty, to generate projections of real neetax cash flows for each of Zenyth's projects based on the project models prepared by Zenyth. Acuity has reovided us with prejections of revenue and expenditure over the life of the current projects. The scope of Acuity's work was controlled by Delotte. A copy of the Acuity report is stiached in Appendix 5.

Acuity's multiclions were based on the following:

an overview of the Company and its projects
analysis of the potential markets for the Company's projects
an analysis of the possible reates to market for the Company's gruicets
an assessment of the technical and commercial risks for the Ummany's projects, together with an assessment of the projects' probability of success in their respective market
an assessment of the potential market size, market penetration and three to market for the Commany's projects
real pre-tax cash flows derived from the matysis above, which we have adjusted for inflation and tax to derive nontinal after tax cash flows.

Doktilio: Zenvih Therapeutics Limited -- Independent Exnert's Report

Delniin

The Acuity renori is based on information provided by Zenyth, antine database searches. maticly accessible subscription services and discussions with Zeavth management.

The key assumptions adopted by Acuity in the preparation of the cash flow projections are:

Fervib and a collaboration nariver will undertake WAD and incur development cross ontil Phase II clinical trials are completed, or in the case of IL-13R, develomment costs will be incurred by the collaborative manner
Zenyth is eligible to receive certain milestone payments until the commercialisation of the $\bullet$ muiect
for projects to be focused out to a third party upon completion of successful Phase II clinical trials. Zenyth will earn a royably and incur casts related to third party myalty armens and overhead allocations
incorporation of a probability adjustment to reflect the likelihood of Zenyth ωï. recriving incurring the projected eash flow (as discussed below). The probability adistrant is based on the comolative probability of Zenyth completing a discrete phase ளில்ல
peak market penceration varies between project, but is to greater than 20% and is acharved on a gradial scale, rather than immediately upon constructionation
the term of the moised will run through to the expiry of the relevant patent, after which time there are no cast: flows. This is based on the assumption that after this neriod, due to commeting and substitute modacts, the technology will be realized. In any eyent, the valuation is relatively insensitive to royalty receipts beyond this period due to the application of a probubility adjustment and the time value of the cash inflows.

We have not undertaken a review of the projections in accordance with AUS 804 - The Audit of Prospective Firancial Information. However, mehing has conve to our attention as a result of our analysis that suggests that the assumptions on which the projections are based have not been prepared on a reasonable basis.

Probability weighting of projected cash flows

The projects that are being pursued by Zervih are at the are-elinical stage of development arearlier. As such, there is a substantial risk in actricy manifested tash inflows due to the uncertainty of the project completing each phase of development. This is particularly the case for projects in the pre-etinical ghase as they require:

further research before the proposed products can be administered to humans
clinical trials before marketing approvals can be obtained, which are likely to be ferathy and cosile
groof this an effective and safe themay is achievable
in some Zenyth projects, decision of the definitive or preferred authory product.

If a project does not progress through a particular stage of development, the future value of the project is most ifkely to be zero and significant costs may have been incurred in progresing the project to that stage. This represents a significant risk to an investor in any biolectrookey company that is undertaking clinical trials.

In order to recognise this risk and to incorporate the risk into the valuation of Zenvih. Aculty has probability adjusted the cash flows. The probability adjustment is based on the assessed likelihood of achieving the projected cash flow, using a cumulative probability of completing cach phase of R&D. The detailed basis for the schection of the below probabilities which is highly judgemental, are set out in the Aculty Report.

笺箧

Deloitte: Zerveb Therapeutics Limited -- Independent Expert's Report

Den 1

The completive probabilities of achieving each stage of development for each of Zenyth's projects, which have been adapted by us, are set out below:

		Table 10: Cumulative probabilities ------------------------------------
					Prodiced Place : Program Place 14 Place 14 (18) Approved Fortune	1986 - Jan Barnett, fransk fotballsk politik (f. 1988)
阻口鬼	į	100%	领燕	77%	33%	猥雑	素酸酶
	Ž	ISSE	Kasta	34%	13%	$\mathcal{N}^{\mathcal{U}}$ .	$\mathcal{P}_{\mathcal{M}}$
主張不可為犯罪	š	ROCK	うしゃく	建碳酸	W.	集築館	85%。
	ð	摄影	电路	229	13%	P.	$6\%$
試験 (15条)	š	授業の場	53%	医膀胱	重复配置	3%	苦酸
	$\stackrel{\prime\prime}{\scriptstyle\sim}$	100%	335%	将教育	12%%	德	6%
NEGF-B	ł	1024	8.1%。	医脾瘤	28%	16S.	ish.
	$\mathbb{R}$	核燃	169	犯骗		$\mathcal{L}_{\mathcal{D}}$	$\mathcal{R}^{\mathbf{N}}$
MAGES		核燃烧	100%	274	13%	漆鸭	$3\%$
		REAL	12%	13%	錦織	W.	3%

Squree: Deloitte & Anully analysis

Note 1: 1 and 2 relate to the phimiry and secondary clinical applications for each project that projected cash flows have been prepared

Note 2: Other refers to projects of a confidential nature

The probability of each project proceeding through three phases of clinical trials, obtaining FDA agrowal and generating revenue is between 4% and 16%.

6.2.2 Discount rates

The discount rate asset to equate the future cash flows to a present value reflects the risk adjusted rate of return demanded by a hypothetical investor. We have selected a nominal after tax discount rate of between 16.0% and 18.5% to discount the future cash flows of the Zenyth projects to their present value. Appendly, 2 outlines the calculation of the discount rute.

The application of our discount rate range to the projected cash flows discussed in Section 6.2.1 gives a net present value for Zenyth's grojects of \$45.8 million to \$72.9 million on a control basis.

$\mathbb{Z}/\mathbb{Z}$ Deloitte: Zeryth Therapeutics Limited -- Independent Expert's Report

Delle a

$6.2.3$ Surplus assets

The investment by Zenyth in Avexa is a surplus asset. We have included it in our valuation of Zenyth as discussed in section 5.2.

We have treated the cost of the Option Scheme to Zenyth as a surplus liability, in that we have deducted the cost of repurchasing the outstanding options under the Option Scheme from the value of Zenyth in order to evaluate the Proposal.

6.2.4 Net cash

The company carries a significant cash balance that is introded to find future R&D. We have valued this cash separately, based on the book value of cash and investments held at 30 Jane THUS.

Summary of valuation $6.3$

The value of Zenyth derived from the discounted cash flow method is summarised below.

Table 11: Summary of valuation

The Community of Community Community أأساس المحامحات وماليهما كالسابس المستنب المستنب المستنب المستنب المستنب
Value of forecast cash flows	6.2.2	45.8	729
Net cash	6.2.4	43.8	寻觅意
Shares in Avexa	6.2.3	$-3.3$	-5. I
Cost of the Option Scheme	¥	(0.9)	(0.9)
Value of 100% of Zenyth		93.8	122.9
Namber of Zenyth shares on issue		125.2	129.2
Assessed value per Zenyth share (\$)		SU 77	SO.WK

Source: Delcitte analysis

$46$

Deloitte: Zenyth Therapeutics Limited -- Independent Expert's Report

Delota

$6.3.1$ Sensitivities

The above values are highly sensitive to a tampber of inputs assumed in the discounted cash flow valuation of Zenyth. A summary of these sensityfikes is shown in the table below:

Table 12: Summary of sensitivity analysis

The company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company
i - Might - Low High Ease Change-in (\$-per (\$-per ) Ease factor - share) share)
Rase value			541.77	多仇熟彩
Nominal post tax discount 紫藻【影】	83% - 89%	医心腹痛	\$0.71	SE 06
Delay of contrococenent of Phase II	શ′ેલ	$+1.2$ years.	\$0.88	\$0.92
Reversion	various	秘密線	\$8.75	SEDO
Costs	various	不知高號	\$0.76	SI 08
Accumulated probabilities		平东多%	30.74	31.OL

Source: Deloitte analysis

The valuation of the projects is highly reliant on the assumptions made with regard to the commencement of each phase, the probabilities associated with success and the discount rate.

Deloite

Cross check - comparable transactions $6.4$

We have compared the premium implied by our valuation of Zenyth to previous share trading and to premiums paid on comparable transactions.

Table 13: Biotechnology transactions

	m		MANAGER an a
	Transacti The Only Walkie Tiday week weeks P ^arry Acquires (1999) (2008) (2008) (2009)
NeuTec Pharma pic	No satis Pharma A.G	567.3	13.5	181.3	109.8
CAT	AstraZeneca ple	1,885.1	臨身	的复数	67.5
Abgerix Inc.	Aingen lac.	2.127.3	58.6	573	67.7
Casina Carp.	GiaxoSnithKline ple	300.8	47.7	48.7	31.7
Average			-16.7	71.8	74.2
Implied Premium:
Zenyili (per shirre)	CSL cash offer	SO 86	59.3	罰訂	136.8
	Low valantion	50.77	42.6	62 I	71.I
	Hiat valaation	50.98	累上等	106.3	117.8

Source: SDC Platinum & Deloitte analysis

Note 1: based on the period prior to the announcement of the offer

The premium of the price offered by CSL under the Proposal to the share grice reflects a premium to share trading prior to the announcement which is in line with premiums exhibited in comparable transactions.

De kritte: Zanyth Therapeutics Limited -- Independent Expert's Report

Delote

Valuation of the options 7

$7.1$ Intraduction

In this section we have used the Black-Scholes egtion pricing model to value the constanding entions on issue to subscribe for Zenyth shares and anoticd a discount for lack of murketability. We have med this methodolowy since Zenvth does not nay dividends, and whilst vested shares can be exercised at any time, the Hlack-Scholes model provides the maximum theoretical value for the option. Under option pricing theory, the value of an option is generally maximised by delaying its exceptse to the latest possible date (i.e. maximising time values.

$7.2$ Valuation inputs

The following inputs were used in apatying the Black-Scholes option pricing methodology to estimate the fair market value of the outstanding options:

Table 14: Valuation input

-
- Etize - Prize - Prize - Prize - Prize - Prize - Prize - Prize - Prize - Prize - Prize - Prize - Prize - Prize - P Timonomy and a film of the second second second second second second second second second second second second MANA

Spot price	鎚翁	Offer price including Avexa shares
Share price volatility	50%	Estimated volutility of Zenyth share price
Risk free interest rule	5.78% - 6.06%	Government band for the equivalent term of the options
Divident yield	猿豹猴	Historical dividend yield, no dividends are proposed in the future
Marketsbility discount	30.0%	Refer to commemory 7.2.2.

Source: Detoille emalusis

Our considerations regarding the more significant inputs are set out below:

$7.2.1$ Share price volatility

Taking into account the historical velatility of Zenyth's listed shares over the previous two years and the ASX as a whole, we have estimated the volatility of the underlying Zenyth share price to be apprendmately 50% per amam. This is consistent with volatility of companies in the biotechnology sector with projects at similar phases.

727 Marketability discount

The Black-Scholes option valuation model assumes that there is a liquid market for the options. We have applied a discount for lack of marketability to the value of the options to reflect that the options are unlisted and are not assignable or transferable.

In practice, and from a review of restricted stock studies, discounts for back of marketability mage between 10% and 50%. A discount for lack of marketability of 30% was selected to discount the value of each option.

$\Lambda^{\prime\prime}$

Exploitto: Zenvil: Tireancatics Limited - Independent Experi's Report

O DE CARD

7.3 Valuation of the share options

Based on the above assumptions and methodology, the value of each replicit surfour is mating in the table behose.

Table 15: Valuation of share options

Total assessed valuation of callons		I.			÷	一次合作金	隐感	護衛隊	E.	I.	紧急。	医额筋	e de
Ausset 1980 1980 1980		墨器	en el altres del controllo La controllo del controllo del controllo del controllo del controllo del controllo del controllo del controllo	×	ž	$\tilde{\tilde{\mathbb{Z}}}$	ri Ž	İ	i.	ã	ã	微微器	I	ã
Tatal consideration under the Option Scheme		Î,	SANCE	\$6,500	ERGIN	\$11,83	5	ma Cin	的复数	医血管膜炎	en de la composición de la composición de la composición de la composición de la composición de la composición Composición	313 A.	\$83,200
Consideration under the Option Science _____		Ş	II OR	SOC	30.A		÷.	$\overline{\mathbb{S}}$	nas Tal	J.	a S	Ã	- 氣の	A S
j Južna			SOBLEM	SOLE	Q		ing dat	15000	400 DR	JERNE	100.R	300.MK	NO OK		5.19.65
			en E		ŝ.	I	Î	ni A	签署	en. S	ã	ã	ā	ez S
entra de la construction 1974 : de la construction 1983 : de la construction de la construction de la construction de la construction de la construction de la c	4 November 2006	EQ Now emphy 2006	November 300 Q	Duranage 1006 zei, guns,	3 Fannis Collag 松泉	Canaber 200 $\bar{z}$ 00000	Alles Massels	KAN ANG TA	10 Emmary 2010	Mine 2016	10 August 12	20 June 2012	30 June 201	30 Fune 2010	Im
________								ಜಲ		$\frac{1}{2}$	Golfi- 200000	贮法 quua	وتباع yas,	-4 awp

SOUTCE! Zeepyst Married & Dennis anabysk

44
Delaitto: Zenyil Theoremsky Linnind – Indonentian Experi s Report

Debia

Read on the muster of options vatuanting and the fair market value of each option, the votal water of the options is \$1.1 million, which compares with the amount being offered by Zenyth
under the Option Scheme of \$3.9 million.

$\mathcal{L}^{\text{dR}}_{\text{c},\text{c}}$ Delcate: Zegyth Thereposites Limited - Independent Bepart's Report

Dela Wi

Evaluation and conclusion Ñ.

in order to assess whether the Promosal and Ortion Scheme are in the best interest of the Shareholders and Opsionholders as a whole, we have had regard to the fairness and reasonableness of the Proposal and Option Scheme, namely.

assesed whether the Proposal is fair by estimating the fair value of an ordinary Zenyth × share and comparing that value to the consideration to be received by Shareholders means to the Process ?
assessed wisether the Option Scheme is fair by estimating the fair value of an option and comparing that value to the consideration to be received by Optionfudders pursuant to the Fropesi
assessed the Francialdeness of the Promisel and Outlon Scheme by conditering other adventures and thendemences of the Provosel and Clorino Scheme to Sharebolders and Orskvibelders.

Valuation of consideration 81

The fair market value of the consideration offered order the Proposal is \$0.86, as follows:

a cash payment of \$2 cents per Zenyth share
aproximately one Avexa share for each six Zerrsth shares held, valued at \$0.24 ner Avesa share, based on the volume weighted average price for 30 days grist to the ainstancement, which equate as approximately \$9.04 per Zenyth share.

82 Fairness of the Proposal

in order to assess whether the Proposal is fair we fune compared the value of the consideration offered with the assessed value of Zenvih.

Table 16: Assessment of the Proposal

and the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contra 1940 vaimen vaimen vaimen vaimen vaimen vaimen vaimen vaimen vaimen vaimen vaimen vaimen vaimen vaimen vaimen 1900 - Johann Brand, martin Brand, martin Brand, martin Brand, martin Brand, martin Brand, martin Brand, martin
Assessed value of Zenyth Value of spaal cansideration	- XIII 7 7	WA 426 SB 86

Source: Dekulte analysis

As the total value of consideration is within our assessed range, in our opinion the Proposal is šašn.

$8.3$ Fairness of the Option Scheme

As the value of the consideration offered for six of the series is less than our assessed valuation, it is our opinion that the Option Scheme is not fair.

يجادر

Deloitte: Zanvih Theographes Limited -- Indenember Domeri's Report

Talawa.

Reasonableness 変正

ASIC Police Statement 75 considers an offer to be reasonable if either:

the offer is fair
despite not being fair, but considering other significant factors, chareholders should accept the offer in the absence of any bigher bid before the close of the offer.

As the Proposal is fair it is also reasonable. We have also considered the likely advantages and disadvantages to Shareholders of accenting the Proposal.

We have also considered the reasonableness of the Option Scheme based on an analysis of the likely advantages and disadvantages to epitonholders of accepting the Option Scheme.

Administer

the consideration offered gursuant to the Proposal represents a significant premium to the Zenyth share price prior to the amouncement on 17 July 2006. The consideration offered per Zerviñ slaare renvesaatist.
a premium of 59% to the closing orics for a Zers th share on 14 July 2006 of \$0.54 the mice may include speculation of the Proposal).
a premium of 79% to the 30-day VWAP of \$0.48
a premium of 65% to the 90-day VWAP of \$0.52
the Option Scheme provides optionholders with an opportunity to realise a value for their opiens, the majority of which wave "out of the mency" prior to the announcement of the Proposal. As the options are neither fisted on a stock exchange nor assignable/tradenble, in the absence of the Option Scheme holders of cotions currently have limited opportunities to realise value for the options
the Ortion Scheme, for all but one series of options (series 1), provides Optionholders with a value in excess of the intrinsic value of the options based on the value of a Zenyth share innited by the Proposal, Intrinsic value represents the excess of the price of a Zeroth share under the Proposal over the excessive price of the option. The bolders of series I options could achieve a hetter return by exercising their options and participating in the Proposal

Disadvantages

Shareholders and Optionholders who accept the Proposal and Option Scheme may suffer an adverse cash flow impact through any capital gains tax or income tax payahle on disposal of their Zenyth shares. Sharefulders and Opticalnoiders should consult their tax advisers in relation to their personal circumstances
Shareholders and Ortionholders who accept the Proposal and Ontion Scheme will be imiting the benefit derived from any neterital urside in the projects heing nursued by Zervil, Our valuation of Zervilt recognises the substantial risks associated with areclinical stage projects. Inwrever, if a project does reach a commercial stage of development in future vears, the value of Zenyth is likely to be significantly enhanced, at a point is time, to a stage that may significantly exceed the valuation assigned to the shares in this report.

$\hat{\mathcal{L}}^{\mathcal{B}}$

Debille: Zereth Therapeutics Limited -- Independent Expert's Report

Delnik

Conclusion on reasonablemess

The make disadvantnee of the Proposal and the Corton Scheme is that the Shareholders and Optionboâters will love the ability to participate in the lance upside potential if a project, or a mander of projects, are commercialised.

in our view, this disadvantage is office by the sbility of a Sharcholder and Optionholder to realise the current potential in Zenyth's project pipeline, at a fair value, without undertaking the risks associated with maintaining an interest in the company.

The Option Scheme as a whole is not fair (as the takne of the consideration offered for six of the series is less than our assessed valuation). As all but one series of Outlonholders are receiving a value in excess of the intrinsic value of the options, incorporating an element of thue value, and as the Ontion Scheme provides an opportunity to realise a value for the ontions which would atherwise he difficult to achieve, in aur view, the Oraion Scheme is reasonable.

$8.5$ Conclusion

In our opinion, in the absence of a more favourable progress! from modier party, the Proposal is fair and reasonable and it is therefore in the best interest of the Shareholders as a whole. An individual Shareholder's decision in relation to the Proposal may be influenced by his or her particular circumstances. If in doubt the simpholder should consult an independent adviser.

In our enimien, the Orsize Scheme is not fair but reasonable to Optionholders and us balance it is in the best interest of the Ontionholders. An individual Optionholder's decision in relation to the Uniton Scheme may be influenced by his or her moticular circumstances. If in doubt the outionbolder should consult an insternant adviser.

48 Dekritte: Zenvch Theranculos Limited -- Independent Expert's Report

Deloite.

Appendix 1: Glossary

Reference Belizier (1988) (1988) (1988) (1988) (1988) (1988) (1988) (1988) (1988) (1988) (1988) (1988) (1988)

Abgenix	Abesnix inc
Acuisy	Acuity Technology Management Pty Laf
AFSI.	Australian Financial Services Licence
Aimead	Amsal Corporation Limited
ASIC	Australian Securities and Investments Commission
AstraZeneca	ArtesZenera 1 K 1 indud
ASX	Australian Stock Exchange Limited
s.	Australian dollars
AUS	Australian Auditing Standards
Avexa	Avexa Limited
САРМ	Capital asses pricing model
CAT	Cambridge Antibody Technology Group PLC
COPD.	Chronic Obstructive Pulmannry Disease
Corixe	Corina Corp
CRC-CGF	Cooperative Research Centre for Cellular Growth Factors
CSL	CSL Linited
Deboiue	Detoitte Corporate Finance Pty Limited
泊り離れた	Equity market risk premisim
狂顶式	United States Food and Drug Administration
茶室	Firmancial year
G-CSF	Grandacyte Colony Stimulating Factor
GM-CSF	Grandocyte-macrophage colony stimulating factor
11. 112	Interferatio-13 receptor
1.812	Loslos Stock Exchange
Merck	Merck & Co., Inc.
NeuTec	Neaffec Pharma PLC
Presentation	Novartis Pharma AG
NYSE	New York Stock Exchange
CMX	Stockbaim Stock Exchange
Part 3	Part 3 of Schedule 8 of the Corporations Regulations 2001 (Commonwealth)
Proposal / Proposed Scheme	The Share Scheme and the Special Distribution
※ゑD	Research and development
Section 411	Section 411 of the Corporations Act 2001
Section 640	Section 640 of the Corporations Avt 2001
Share Scheme	A scheme of orrangement between CSL, Zenyth and its shareholders ander which all Zenyth shares will be tunsferred to CSL for a cash payment of 82 vents per Zenyth share
Sharcholders	Existing basiders of Zenyth shares
49
	${\sf D}$ øltte: Zenyth Therapeutics Limited – Independent Expert's Report

Delotte

Reference Definition (1999)

50CS	Suppressors of cytokine signalitie
Special Distribution	A special pro-cata distribution by Zenyth to its sharcholders of all shares is holds in Avesa, representing approximately one Avexa share for each six Zenyth shares held
swor	Strengths, weaknesses, opportunities and threats
The Explanatory Booklet	A hanklet containing the detailed terms of the Proposal
VEGF	Vascalar cadedeclial growth factor
WACC	Weighted average cost of capital
Zervsh	Zeavth Theramutics Limited

$30\,$ Delolite: Zeayth Therapeutics Limited -- Independent Expert's Report

Dela La

Appendix 2: Discount rate

The discount rate used to counte the future cash flows to their present value reflects the risk adjusted rate of return demanded by a hypothetical investor. Discount rates are determined based on the cost of an entity's debt and equity weighted by the proportion of debt and equity used. This is commonly referred to as the weighted average cost of capital ("WACC"). The WACC can be derived using the following formula:

1000 25.00 MA. With w
----------------------------------------------------------

The companients of the formals are:

Ă. cost of canity capital ų,
cost of debt $\hat{K}_{\rm st}$
$\mathbf{f}$ . ÷ corrorate tax cate
$E^{\ast}/E^{\ast}$ $\phi_{\ell}$ proportion of company funded by equity
DiV đ. proportion of company funded by debt

The adjustment of $K_3$ by $(1-\epsilon_i)$ reflects the tax deductibility of interest payments on debt funding. The entrotute tax rate has been assumed to be 30%.

As Zeroth does not currently carry any debt, we have calculated the debt to coulty mix of Zenyth, at the date of this report, to be @% debt and 100% equity and therefore apetied a cost of equity rather than WACC to discount projected cash flows to their present value. This capital structure is not inconsistent with industry averages, as set out in Table 17.

In selecting an appropriate range of discount rates and in applying the selected discount rates to the cast flow molections, we have considered the following:

Zenyth's cost of capital, as discussed below
the projected cash flows have been probability adjusted to reflect the statistical likelihood of technical success. However, it does not necessarily contact the filestiment of continercial success, although it is usual for approved therapeutic products to also succeed commercially due to lack of competition. The actual technical outcome is bitary, in that the großert will either succeed (low probability) or not (high probability) succeed
Zenyth's R&D programme requires it to incur a certain level of fisture costs, which may or may not result in the project progressing to the next stage of development
the projects are at a very curly stage and there is significant week to be undertaken to progress the molects, which may lake longer and cost more than currently envisoed
the milestone payments are fixed in terms of amount, although the timing of receipt will depend on when the milestone is actually met-
If a project overcomes the technical and commercial hardles, the timing and magnum of the sycalites seccived will vary from the sychested revalties, rechang significantly
the end markets for which the projects are targeted are very large if a project overcomes the technical and commercial hurdles then it could be extremely valuable. However, as discussed above. there is a very small likelihood (assessed above at between 4% and 1.6%) of this occaming
for each of Zenyth's projects there are a tamber of other competing projects curtently under research. Even if one of Zenyth's projects is technically sciecessful, there may be a

葡复

Delolite: Zaavit Theraceutes Limited -- Independent Expert's Report

Daloman

similar großuct which reaches the market earlier (first mover advantage), or be more effective in treating patients. The opposite may also be true

we see valuing Zenyth's gortfalle of projects as a whole. The risk attached to a gortfalle of products is likely to be less than the sum of the risk anached to each project
depending on the milestone superments for each product. Zenyth will be reimbursed for a proportion of the RAO costs incurred tspecifically IL-13R1 to this sense. the project costs could be exastdered to be partially self-funded, reducing the development costs to Zersyth as it is commensated along the way.

Cost of equity capital (K.)

The cost of equity, $K_{\alpha}$ is the cate of return that investors require to make un equity investment in a fèrre.

We have used the Canital Asset Pricing Model (CAPM) to extimate the K, for Zenyth. CAPM calculates the minimum rate of return that the company must cars on the comityfinanced portion of its capital to kave the market price of its shares unchanged. The $\hat{c}$ APM is the most widely accepted and used methodology for determining the cost of equity capital.

Under the "classical" system of double taxation of dividends which existed in Australia until the introduction of dividend impountion in 1987 (and which will applies in many countries). the cast of equity capital under $\mathsf{CARM}$ is determined using the following formula:

$K = R + \beta(R - R) + a$

The components of the formula arc:

d). required return on equity $K_{\rm s}$
$\hat{M}$ $\overline{\mathbf{a}}$ the risk free mee of return
$R_{\rm m}$ z. the expected seturn on the market portfolio
$\hat{B}$ bets, the systematic risk of a stock which can be objectively measured by the ę. responsiverses of company returns to movements in returns correct on the market portfolio-
ing. specific company risk premium ïš

fiach of the comparents it the above equation is discussed below.

Risk free rate (Re)

The risk free rate compressates the investor for the time value of money and the expected inflation rate over the investment neriod. The treascently adopted proxy for the risk free rate is the home-term anvermment frond mie.

Our cash flow model projects cash flows in US\$, which we have translated to \$ at the current spot rute. Accordingly, in determining R. we have taken the 10-year US Government Hond vield on 31 July 2006 of 4.98%. The 10-year tonal rate is a widely racel and accepted benchmark for the risk free rate. This rate represents a nominal rate and thus includes inflation.

Equity market risk organism (EMR)?

The EMRF $(R_s - R_d)$ represents the risk manximed with bolding a market possible of insegments, that is, the difference between the expected return on holding the market portfolio and the risk free rate. It is the excess return above the risk free rate that investors demand for their increased exposure to risk when investing in equity securities.

塑

Eteloitte: Zenvih Therapeutics Limited -- Independent Expert's Report

Delota

Selected EMRP

A recent study published in the 2005 edition of SBBI, by Ibbotson & Associates, estimates that the future EMRP for the US to be 6.1%, which is based on an arithmetic average.

The recent stacly undertaken for the Centre for Research in Finance at AGSM detailed a number of estimates for the EMRP. The EMRP calculated using arithmetic averaging of returns between January 1974 and June 2004, including October 1987, without adjusting for franking credits, was 5.81%. This RMRP is consistent with other studies in developed markets, In purticular, Roger Rhuston and Peng Chen, of Ibhotson & Associates and the Yale School of Management respectively, estimated the expected long-term equity risk prentium in the US (relative to the form-term government bond yield) to be about 6% arithmetically and 4% geometrically (Financial Analysis Journal, Vol. 59, No. 1, Pabraary 2003).

We have adopted 6% as the ENRP for the purpose of our valuation.

Reta estimate ([6]

Description

The beta coefficient measures the systematic risk of a company in comparison to the market as a whole. A beta of greater than one indicates greater market related risk than average. while a beta of less than one indicates less risk than average.

$\mathcal{K}_{\mathcal{S}}$ Deloitte: Zereth Therapeutics Limited -- Independent Experi's Report

I waar

Delotte

The differences are related to the business risks associated with the industry. For example, the above diagram indicates the media industry is riskicr than the unitities industry. The betafor an asset can be estimated by regressing the returns on any asset against returns on an index. representing the market portfolio, over a reasonable time period.

Market evidence

In estimating an appropriate beta for Zenyth we have considered the betas of ilated companies that are comparable to Zenyth.

and the state of the state
Company Name					Currency Enterprise % Debt value = Levered Unlevered
Micromet inc	USD	60.6	發怒	1.38	1.38
Alexion Pharmaceuticals lnc.	USD	1.031.6	蔡建筑	1.28	1.28
XOMA Limited	USD	193.0	转翅瘤	1.13	ŁÜ.
Tanox het.	USD	469.9	教授家	上降電	长海峰
Seattle Genetics Inc.	USD	184.8	衰弱症	1.72	1.72
Dynx Corporation	USD	84.7	衰變落	1.73	1.73
Morphosys Ag	FUR	239.5	意想家	上层旅	1.20
Medarex Inc	USD	1.987.7	衰殺隊	1.65	1.63
Атогадс					1,44
High					1,73
Lose					1.01
Nothan					1.W

Table 17: Analysis of betas for listed companies with comparable operations to Zanveth

Source: Bloomberg

The comparable companies are described in Appendix 3.

The observed bets is a function of the underlying risk of the cash flows of the cornmany. together with the capital structure and tax position of that company. This is described as the kevered beta.

The capital structure and tax registion of the entities in the table above may not be the same as Zeryth. The levered beta is often adjusted for the effect of the capital structure and tax position. This adjusted beta is referred to as the unkevered beta. The unlevered hem is a reflection of the underlying risk of the pre-financing cash flows of the entity.

Delnii La

Beta (B) factor

In considering an appropriate beta for Zenyth we have considered the following:

à the average unlevered beta for the communics that are communible to Zenyth is 1.44 and mange from 1.01 to 1.73
the scheeted comparable comparing are involved in R&D in projects tregited at similar indientinoe
Zenyth's carrent projects are at two-clinical stages of development
Zerwih's strategy is to develop projects to the completion of early-stage human trials to grove efficacy in humans and then to heenee the fit to a third maty
the comparable companies have projects of different stages of development. This includes $\bullet$ XOMA Limited that receives a royalty interest on an approved therupeutic antibody. The other companies have clinical trials under way in a number of projects
Akexion, Medarex and Tamex have high entermise values relative to Zenyth, based on high market capitalisations and we would expect smaller companies to have higher rates of return than larger companies.

Hased on the above, we would expect the beta for Zenyth to be at the higher end of the comparable company range. We have adopted a lovewed beta for Zenyth of 1.50 to 1.75.

Specific company risk premium (a)

The specific company risk premium adjusts the cost of equity for company specific factors. The CAPM assumes, amongst other things, that rational investors seek to hold efficient perfolios, that is, portfalios that are fully diversified. One of the major conclusions of the CAPM is that investors do not have regard to specific company risks (often referred to as unsystematic risk).

There are several empirical studies that demonstrate that the investment market does not ignore specific company risks. In particular, studies show that:

on avenuer, smaller compenies have higher rates of return than larger companies (often referred to as the size premium)
on average, early stage companies have higher rates of return than mature companies.

$\mathcal{K}_{\text{eff}}$

Deloitte: Zargd: Therapeutes Limited - Independent Expert's Report

Delawa

Size premium

Several research studies indicate that smaller companies have higher rates of return than lates communics. The following table summarises the returns for different size categories from 1926 to 2003 for companies on the NYSE, the American Stock Exchange (AMEX) and the National Association of Securities Dealers Automated Quedation System (NASDAQ).

Table 18: Evidence of size premium

MARIA MARIA MARIA MARIA MARIA MEN
– The Community statistics of answer returns – Summary statistics of answer returns – I

Alban Maria (Alban Maria Alban Maria) (Alban Maria) (Alban Maria) (Alban Maria) (Alban Maria) (Alban Maria) (

Harrison (
resure The Street (Securetric Arithmetic Street) The Street (Securetric Securetric CAPM)


.		kan ka ka manang mga mga mga mga mga mga mga mga mga mg

Largest (Est decile)	9.6	圣机本	80.74)
Large (2nd decile)	10.8	13.2	0.30
Mid-cap (3rd - 5th decile)	18.3	科学	4.91
Low-cap (6th - 8th decile)	16.7	13.7	1.70
Micro-cap (9th - 10th simikët	12.7	翻題	情願

Source: Stocks, Bonds, Bills and Inflation Valuation Edition 2004 Yearbook, Ibbotson Associates

Note 1: calculated as the difference between estimated return in excess of the riskless rate

Early stage projects

Zenyth's major projects are in an early stage of development. As streh, the Company has risks that are similar to an early stage business seeking to expand rapidly. Investors in early stage comparies often require higher rates of retten than investors in mature companies. Venture capitalists are a common source of equity capital for early stage investments. The Australian Verture Capital Guide provides the following indicative guidelines for their required rate of return.

		Table 19: Venture capital required rates of return

		$\mathcal{L}$ . The contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of th
	1988 - Andrea Stadt Britain, Amerikaansk politik (f. 1988)


W.		, , , , , , , , , , , , , , , , , , ,

Starting a new business. Expanding a business, MBOs or MWis30.0% to 40.0% 20.0% to 30.0%

Source: Australian Venture Capital Guide 2003

$\mathcal{L}^{\sigma}$

Deloitte: Zenyth Therapeutics Limited -- Independent Expert's Report

Delome

These rates of return are significantly higher than those required for manne listed companies. The reason that the discount rate required for an early stage company is different to that required his a mature company is because the relationship between business risks. finance risks and the cost of equity changes as a company progresses. from an early stage company to a mature company. The relationship between business risk, fanance risk and cost of equity is illustrated in the following figure.

Figure 8: Business risks, finance risks and cost of equity

Source: Adapted from The Valuation of Businesses, Shares and Other Equity, 3^nd edition, W. Lonergan

Selection of specific company risk prominm

We have selected a specific company risk premium in the cause of 2.0% to 3.0% for Zenyth.

In determining this premium we have bad regard to the following:

size premium: Zenyth's enterprise value is significantly less than the enterprise values of ¥ sume of the comparable companies
carly stage of development: Zenyth's projects are in an early stage of development. For this resean, Zonyth is likely to be more exposed to a number of risks than companies with grojects in clinical trials.

$\hat{S}_\mu(\hat{q})$ Deloitte: Zargt: Therapeuics Limited -- Independent Expert's Report

Deloite

Conclusion on cost of equity

Based on the above factors we have extrnated a manioni post-tax cost of equity, Ke, to apply to Zenyth's cash flows, in the range of 16.0% to 18.5%, as follows:

Table 20: K, applied to valuation of Zenyth

kaput in the community of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of t
Risk free rate (%)	柔身總結	4.02%
EMRP (%)	6.00%.	義振縣
Fleta	1.50	1.75
Specific company risk premium (%)	2.00%	3.483%
Cost of equity capital (Ke)	16.0%	龍鳳鶥

Source: Dekulte analysis

$\mathcal{L}_{\mathcal{G}}$ Deloitte: Zeryth Therapeutics Limited -- Independent Expert's Report

Deloite

Appendix 3: Comparable company descriptions

Micromot Inc.

A biotechnology company that develops movel amibody-based drogs for the treatment of cancer, inflammation and autoiremane diseases.

Alexion Pharmaceuticals Inc.

A biopharmacentical exmosav that researches and develops proprietary immunoreasistory compositions for the incorporate of autosimmative and cardiovascular disenses. The company develops C5 complement inhibitors and Apogens which are two classes of potential therapeutic compounds designed to selectively target specific disease-causing segments of the immune system.

XOMA Limited

A hiopharmacutical exupany that develops and manufactures genetically engineered protein, agoride, and anthody abarraaceaticals. The compary's medical targets include bacterial and fungal infections, infectious complications, and immunologic and inflammatory disorders. XOMA's primary drug development platform is bactericidal/permeabilityincreasing protein.

Tanax Inc.

A biophermacentical exaggeny with expertise in monocloual antibody technology. The company discovers and develops theraportic monoclorul untibodies designed to address medical needs in the areas of asthma, allergy, inflammation, and other diseases affecting the human institute system. Taztov Xolair is an anti-internationalobolin E antibody for allergic sethens-

Seattle Generics Inc.

A company that discovers and develops monoclonal antibody-based drags to treat cancer and related discuses. The company's technologies increase the potency and effusey of monoclonal antibodies with specificity for cancer.

Dygx Cara

A biopharmaceutical company focused on the discovery, development and compare infination of anifodics, small posteins and peptides as therepeatic products for medical needs. particularly in the areas of inflammation and one olegy. The company currently has two recombinant proteins, DX-88 and DX-890, in phase H clinical trials.

MorphoSys AG

A biotechnology company. The company that ases proprietary technology to develop human unifhedies tailored to treat specific diseases. MarphoSys is developing medicines to treat rance mat inflameation.

Medarex Inc.

A biomharmaceutical company developing antibody-based therapeutics to fight cancer and lik-throtening and debilioning discuss. The company has several products in clinical development for the treatment of cancers and leakaemia, mateimmane discases, and ophthalmic conditions. Medares also creates and develops hamast antibodies for itself and offices.

$\mathcal{C}(\widetilde{\Omega})$

Deloitte: Zenvis Therapeutos Limited - Independent Export's Report

De la provincia

Appendix 4: Comparable transactions

Below are the details of comparable market masserions, listed by target company.

Table 21: Biotechnology transactions.

Timbungan Kabupatén In					Sternan
	كية Transaction . Tanget : Date Value 1.day week weeks . Cospany Acquirer : Country effective (Sm) . (%) (%) (%)
Neaffee Cambridge Antibody Technology	Novartis Азагайствеса	Britain Britain	机锯跳落	3673 1,435.1	13.3 磁步	881.3 陈轻身	109.8 67.5
Abgenia	Astànest	USA.	Apr-06	2,127.3	照春	57.3	67.7
Cesixa	GlaxoSmahkTine	毛液丸	Dec-05	300.8	47.7	48.7	31.7
Average Average - market					46.7 53.6	71.8 67.5	74.2 71.1
weighted

Source: SDC Plateam and Delotte analysis

NewText

Novania Pharma AG (Novania) of Switzerland, a wholly-owned unit of Novania AG declared uncombitional its tender offer to acquire the entire ordinary share capital of NeuTec-Fharma PLC (NeuTec), a Manchester-based munufacturer of pharmaceuticals, for GB£10.5 (188819.523) in cash per share, or a total value of CBE305.12 million (1388567.31 million).

$CAT$

AstraZeneca PLC (AstraZeneca) declared unconditional its tender offer to acquire the remaining \$0.8% interest, or 41.735 million ordinary shares, which it did not already own, in CAT, a Cambridge-based manufacturer of pharmaceuticals, for GB£13.20 (US\$24.81) in cash per share, or a want value of GB£550.77 million (US\$1.035 billion).

Abgenix

Angen acquired all of the outstanding common stock of Abgenix Inc (Abgenix), a company specializing in the development and manufacture of human fluxepeatic antibodies, for US\$22.50 in cash ner stare, or a total value of US\$2.127 billion. The transaction was subject to regulatory asprovals.

Corixa

GlasoSmithKline PLC acquired all the categuraling common stock of Corisa Corp (Corisa),a biotechnology company, for US\$4.40 in cash per share, or a total value of US\$300.833 million, including the assumption of an undisclosed amount in fiabilities. The transaction was subject to the approval of Corixa stockholders and regulatory authorities.

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Deloitte: Zenyth Therapeutics Limited -- Independent Expert's Report

Deloite

Appendix 5: Acuity Report

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7 September 2006

Deloitte Corporate Finance Pty Limited 180 Flinders Street Meliwarne VIC 3000

Orse Sire

Independent Industry Report - Zenyth Therapentics Limited

This report has been prepared at the recusse of Deloitte Corporate Finance Prv Linited (Dešoitte Cornorate Finance) for inclusion in an indenendent expert's report to be addressed to the Directors of Zenyth Therapeutics Limited (Zenyth or the Company). We understand that the independent expert's report will be dated on or about 23 August 2006 and will be included in an Explanatory Scheme Booklet to be provided to Zenyth shareholders in relation to the processed acquisition of all outstanding shares in Zerveh by CSL Limited (CSL) by way of a scheme of arrangement (the Scheme). Definite Corporate Finance is required to provide an opinion whether the preposed offer by CSL is in the best interest of Zenyth's shareholders.

The consideration offered by CSL consists of 82 cents per Zenyth share. In addition, there will be a separate special distribution of a pro-rata capital return to Zenyth's shurcholders of Zenyth's shareholding in Avexa Limited.

Acaity Technology Management Pty Ltd (Acaity) has been requested by Detoitte Corporate Finance to review the technology, patents and licence agreements held by Zeayth and movide financial projections for the various Company projects which will form the basis for a valuation of intangible assets to be undertaken by Deloitte Corporate Finance.

Zenyth is a developer of antibody-based therapeutic products and its intangible assets include:

owned or licensed-in patents which underpin these proposed nroducts.
additional research results rertinent to the further development and exploitation of research, and
agreements with various parties to collaboratively develop and commercialise aotential aroducts.

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Spatifically, we were readired to provide a massit on the following matters:

an overview of the Company and its projects including its patents.
analysis of the potential markets for the Company's projects,
an analysis of the possible reakes to market for the Commany's prejects.
an assessment of the technical and commercial risks for the Company's projects.
together with an usedsmight of the projects' probability of stacess in their resnective market.
an assessment of the astential market size, market acnotration and time to market for the Company's projects,
cash flow forceasts by project over the expected life of the patents, and
probability adjusted cash flows based on the above analysis.

We understand that Defolite Corporate Finance will rety on this report and the eash flow models that we have provided in undertaking its own valuation of the Zenyth intangible ussets and preparing its independent expert's report.

Ť Zenyth Therapeutics

ÿĵ History

Zenyth's predecessor company, Amrad Corporation Limited (Amrad), was fermed in 1986 as a public unlisted company to develop, protect and commercialise research from keding Victorian medical and scientific research institutions. Founding shareholders were the State of Victoria and four Victorian medical research institutes. The State Government provided the initial capital base. The company's aim was to extablish an Australian-owned pharmaceutical company aligned with the existing medical research resources and with adequate financial backing and managerial expertise to value-add to Australia's research hase.

To encender cooneration between Amrad and the founding medical research institutes. in strangement was initiated whereby each of the institutes cave a first right to negotiate fanding of, and commercial rights to, certain projects at the institute in exchange for a contingent equity interest through the issue of shares. These pre-emptive rights no kneer exist and are not a consideration in valuing current intengible assets.

A number of private capital raisings were undertaken by Amrad prior to its initial public offering and stock exchange listing in 1996.

In addition to its pharmaceatical research activities. Amrad operated two grofitable marketing businesses: one hased on licensed in ethical pharmaceuticals, Amrad. Pharmaceuticals -- a ioint venture with Merck Sharae & Dohme (Australia) Ptv Ltd: and the other in laboratory reagents, instrumentation and diagnostic products, referred to as biotechnology mysharts. Amrad Biotech. Through these related business activities Amrad built an infrastructure, beyond R&D, in manufacturing, marketing, sales and distribution, which, at the time, improved its balance of commercial activities compared to other votum R&D oriented communics.

In 1998, the company acquired ICT Diagnostics Ltd with the objective of entering the medical diagnostics field. This company was sold soon after because of disappointing francial results.

In December 1999. Amrad sold Amrad Biotech to Chemicon International. Inc. for \$14 milion as not of a refocussing of the consense on its core pharmacestical R&D strengths, a process which continued for several years. It also sold its 55% stake in Amrad Pharmacenticals in 2000 for \$20.75 million, with payment received over a four vear pericel.

Part of the consolidation newcase included the 1999 sell down of its interest in the natural product's screening basiness. Amrad Discovery Technologies, subsequently rearned Cervial Biosciences Ltd, with Zenyth currently holding 10,280,000 shares. In 2004. Amrad snun out its anti-infective pharmaceutical business into Avexa Limited. Zeavin retains equity in Avexa with a holding of 21,062,000 shares.

A namber of Amrad's earlier research programs had progressed to clinical trials stage but were cither abundaned following a failure to demonstrate adequate efficacy or discontinued as a consequence of the decision to narrow the focus of research activities.

In December 2005, Amrad Corporation Limited changed its name to Zenyth Therapeutics Limited.

$L²$ In-process R&D

Zenyth's twainess strategy is to focus on antibody-based therapeutics and to rescurch and develop a portfolio of projects which have strong patent protection and bighcommercial potential to the completion of early-stage human trials, generally Phase IIa at which point there is some evidence of efficacy in humans. Once this has been achieved the Company will seek to out-licence the intellectual property.

Zenyth currently supports research into four pharmaceutical entities and a monber of other programs which are not discussed in detail in this report. Table 1 presents the leading projects and potential applications, along with the expiry year for the most recent patent applications (indicative of the life of an out-licence contract), current etinical development status and an estimated commencement of elinical trials (Acuity's estimates).

Discovery, in the context of the present valuation, refers to the fact that a compound or antibody suitable to progress into formal preclinical development has still to be developed. Predinical development refers to the fact that a candidate has been identified, or at least short listed along with a number of potentially promising. molecules, and is undergoing a program to demonstrate adequate sufety and efficacy to justify burnars testing.

Project	Codahorating Partiser	Paden Is (banest expërv)	isatication.	States.	Consus. iš severa Trisils
组 J JReed	March & Co.	1827	Severe asílmas	Presinkat	無魔管
计开线的	Manak & Co	1020	Chronic obstructive palusonary disease	Freehrisch	2011/32
GMACKFRR	CAT	2026	Altenmatiki antribis	Presinaal	2007
CALCSERs	K AT	2026	Milipie selern is	Practinical	701182
GACSE	Maritica	2025	Chanse oberrative polnomury diacese	Discovery	2009/30
GCXE	Wizrał krei	2023	Chemmand arthritis	Lesswery	2012/33
veck-h	王に発	2023	Kheumaand arthritis	Dearery	2008/10
vegfy	し次次	2025	Calarectal cancer	Lancovery	2012/13

Table 1: Current Projects

The interlection-13 receptor (IL13Ru1) antagonist is an antibody which was developed by the Company to bind to the receptor and block the processes that would normally follow the attachment of fl.13 evioltine. The all submit of the recentor is activated by both B.13 and apother cytokine. B.4. both of which are thought to be involved in the mathology of asthma and other respiratory diseases. This recentor was discovered by Waiter & Eliza Hall Institute of Medical Research (WEHI) researchers in a callaboration that involved the Consecutive Research Centre for Cellular Growth Factors (CRC-CGF) and Zenyth has patents covering this receptor as a therapoutic target and antibodies to the receptor. Zenyth licensed access to the UItiMAb^® human antibody technology of Medares, Inc. to greduce human amibacties. An optimized lead antibody has been selected for full preclinical development by partner company, Merck. with asthma the initial targeted indication.

The granulocyte-macrophage colony-stimulating factor (GM-CSF) receptor program is also derived from the CRC-CGF and is supported by extensive studies undertaken at the Royal Methoarne Hospital. These studies demonstrated that CM-CSF plays are innorm role in the develoment of rheamatoid arthritis in animal models of the disease. In these models, blocking the activity of GM-CSF with an antibody was able to significantly reduce the development of disease pathology and this suggests that anagonists of GM-CSF may also be useful in the treatment of human disease. An antibody that binds to the haman GM-CSF recentor and which blocks GM-CSF activity has been developed by Zenyth in conjunction with Cambridge Antibody Technology (CAT, now a wholly owned subsidiary of AstraZeneca).

The G-CSF collaboration aims to develop therapeatic molecules that inhibit the activity of the cytokine grandboyte colony-stimulating factor (G-CSF), or its recentor. G-CSF regulates the production of key inflammatory cells and scientists at WEHI have demonstrated that blocking G-CSF activity can have an impact on the development of inflammatory disease in animal models. Treatment was effective even once disease was esablished and was comparable to the effect seen with anti-TNF antibodies, the target of carrent highly successful treatments. Further suggest cornes from the observation that administration of G-CSF to a mease with induced arthritis exacerbated the disease. This is an early stage project with suitable antibodies still to be developed.

In addition to the WEHI patents which cover the use of antagonists of G-CSF. Zenvih has an exclusive ficense to marine (mouse) anti-G-CSF receptor antibodies developed by the Ludwig Institute of Cancer Research (LICR) and ratents covering such nonleaches.

VEGF-8 is a member of the vascular endothelial growth factor cytokine family. These evtokines regulate that activity and function of endothefial cells and are essential to the development and growth of new blood vessels. The process of new blood vessel formation is referred to as angiogenesis and has been demonstrated to be a feature of various pathologies including cheamatoid arthritis. The growth of solid tumours also relies on angiogenesis. Inhibiting angiogenesis by a variety of mechanisms is receiving considerable attention in the development of cancer therapies. Generated is Avastin⁸ is a monoclonal artifiedy inhibitor of VEGF-A activity and the notential of VEGF-B auftudies has been demonstrated in more with inniunted tunisians. Zenvili also has evidence supporting a role for VEGF-B in the development of rheumatoid arthritis.

Zenyth and LICR independently filed putents covering VECP-B and its modulation by way of antibodies. These patents are the subject of a licensing arrangement with a sharing of costs and income.

Colisborations

Zenyth's main commercial collaborators are:

Merck and Co., Inc., one of the world's largest pharmaceutical and vaccine revisers. Merck has a licence and research collaboration acreement with Zerwih for the further development of H.I 3Ra1 antibodies whereby Metak meets all expenses and has the right to globally market scoducts for all indications.
Cambridge Amibody Technology Limited, acquired by AstraZeneca in 2006, has in collaboration with Zenvth developed a human antibody against the GM-CSF receptor. The antibody is currently undergoing formal preclinical testing. The relationship between the companies is a 50:50 cost and profit share.

Muritien Therapeatics Limited, a company formed by the WEHL has exclusively licensed the WEHI patents covering the use of G-CSF antagonists in inflammatory disease and has entered into a collaboration with Zenyth to jointly fund R&D of a G-CSF antacoust on a cost sharing basis through to completion of proof-ofconcept in human clinical trials. As MuriGen is a recently formed entity there is a risk that it may not be able to meet its commitments in funding the G-CSF project.

Zenyth's major research collaborators are:

Walter and Eliza Hall Institute of Medical Research in Melbourne is one of the world's leading medical research centres. The huniture's intermational resumation has been bailt mort maint contributions to immunology. Insertatelogy, cancer. makiria and natoimmune diseases, including diabetes, maltiple selerosis, coclinedisease and rheumatoid arthritis.
Ludwig Institute of Cancer Research is a global, non-profit organisation with a commitment to discovering treatments for cancer. LICR has nine Branches in Australia, Brazil, Belgium, Sweden, Switzerland, UK and USA.

Disease Targets & Markets

Asthma

A proposed outcome of the H.13Ru i project is a product for the treatment of severe asthma. Asthma can be defined as a reversible bronchial obstruction, characterised by recurrent attacks of breathlessness and wheezing daz to inflummation and hyperreadersiveness of the tune brunchi. Asthma cannot be cured, but in most cases its effects may be minimised fluough change and control of environment, and drugs, However, around 10% of asthmatics suffer from a severe, nersistent form of the disease which is inadequately controlled by current treatments and it is this population that may benefit from Zenyth's discoveries.

Coricostersids and long-acting \$2 agonists are used in the prophylaxis of asthma. These draws reduce airway hyper-responsivences and broachial mucosal inflammatory reactions, such as oederna and mucans secretion. Two classes of corticosteroids are commanty used: (a) inhaled steroids, such as beclamethasone, are indicated for first line prophylactic use; and (b) oral steroids, such as dexamethasone and methylprednisolone. are used as short course rescue therapy in the control of exacerbations of asthma. They are used to prevent attacks in severe asthma where control of symptoms cannot be achieved with maximal doses of inhaled steroids and broachedilabors.

Asthma affects an estimated 17.2 million reradus in the USA and 12.5 million are on prodiviseit treatment. In 1997, there were more than 1.8 million emergency denariment visits, and 8.4 million GP visits due to the discase. Almost one million people spent an average of 3.2 days in hospital with asthma. It has been estimated that the clobal hurden af asthma is en the order of 300 million neuric¹. In developed connities incidence is rising by a dramatic 50% per decade.

US citizens spend over US\$6 billion a year on asthma related health care expenses. from hespital and physician costs to planmaceuticals. The average cost of asthma treatment in the US is USS660 per year. however mild asthma costs US\$77 a year per capita, compared with US\$13.500 for severe asthma². The average cost of one asthmarelated hospitalization for a child in 2003 was US\$7.538.³

The world market for all types of anti-asthma drags exceeds US\$13 hillion and is growing rapidly (over $10\%$ pa) as the incidence of the discase increases. The feading product in $2005$ was Advair³⁶ Scretick³⁶ (GlasoSmithKtine) with USS5.5 billion in sales. while three other products sold more than US\$1.0 billion each.⁴ The effectiveness of these drugs is variable and there is growing concern with adverse side-effects from long term usage of corticosteroids.

An antibody product, Xolair^® (Generatech, Inc.), is on the market for asthma. It is a humanised antibody that targets a naturally occurring untibody, IgE, that is a key factor in allergic asthma. Xolair sold US\$188 million in its first full year of sales in 2004, and US\$327 million in 2005, with an annual per nation cost of US\$10.000 to \$12.000.²

Rheumatoid Arthritic

Arthritis and other sheamatic conditions are among the most common chronic diseases. Arthritis prevalence increases with age, affecting approximately 60% of the population aged 65 years or older. As a result of romalation demographics trending towards a larger percentage of elderly persons, the number of people living with nonfatal but disablina conditions such as arthritis is increasing.

The World Health Organisation estimates that there are 165 million people in the world with rheamatoid articliis. The US loses about US\$116 billion, approximately 1.4% of US gross domestic product, in medical care and indirect costs every year because of artiritis. Of this, US\$51.1 billion is in direct medical expenses.

Global Barden of Asthona, May 2004. Meth'www.ginasthma.com/

PharmaProjects, January 1988).

US Denartment of Health and Haman Services' Healthcare Cost and Utilization Project.

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The most common type of arthritis is osteoarthritis, affecting more than 16 million Americans. Rheumatoid arthritis affects 2.5 million Americans with only about 68% of patients (or 1.7 million patients) diagnosed with the condition. Of the diagnosed patient normlation, only $60\%$ (or 1 million) are actually treated with pharmaceutical therapics for the disease. Other missent management entions include a change in Hestyle, eg. exercise and diet, and surgery. Around half the medically treated patients, or 500,000 people in the USA, are on methotrexate, and about half of those patients (about 250,000) continue to experience some residual disease and could benefit from additional therany.

Arthritis and other rheurnatoid couditions may be treated by a number of prescription drugs, over the counter (UTC) rain relief products and supplements. Until recently, non-steroidal antimilammatories (NSAIDs) were the main source of relief, but these have been dramatically surpassed by the evolvoxygenase inhibitors (coxibs). It is estimated that, prior to the withdrawal of the coxib Vioxx, 60% of drug sales to the sector were coxibs (Celebrex^®, Vioxx^®, Bextra^®,) and 20% NSAIDs (Voltaren^®, Advil^*). Other drugs included disease-modifying anti-rheumatic drugs (DMARDs) (Avara², methotrexate) and the newer biological therapeutics (Enbrel², Remicade³, Humira³).

Current antibody therapies are directed at the inflammation inducing cytokine, tamour ncereds factor-a (TNP-a). The cytoking is refeased late in the inflammatory biochemical chain and is hest one of several cytokines involved in inflanmation. Ceniscor's (a Johnson & Johnson subsidiary) Remicade^® falls into this class.

Up to half of patients treated with anti-TNF biological therapies fall to achieve a $\,$ satisfactory response in their symptoms and hence the initial tarnet population for Zenyth's therapeutics is the TNF inadequate responder patient population.

Presciption anti-arthritic drugs had global sales of US\$15.8 billion in 2005 led by Entrel^* with sales of US\$3.657 billion.⁴ The antibodies, Remicade^* (Schering-Plough and Johnson & Johnson) and Humira^® had sales of US\$3.547 billion and \$1.4 billion respectively. Celebres^®, saw sales stump from US\$3.3 billion in 2004 to \$1.73 billion in 2005.

Chronic Chstructive Pulmonary Disease

Chronic obstructive galmonary disease is a chronic hang disease that includes two main ilinesses; chronic bronchitis and emphysema. Chronic bronchitis is inflammation and evenual scarring of the broachi (airway tubes) while emphysema is enlargement and destruction of the alveoli (nir sacs) within the hangs. Many patients with chronic obstructive pulmonary disease have both of these conditions. Persons with chronic obstructive rulmonary disease have difficulty breathing because they develop smaller air passageways and have partially destroyed alveoli. The disease develops over many years and is invariably caused by cigarette suicking.

About 14 million people in the US have chronic obstructive pulmentry disease.

There is no cure for chronic obstructive pulmonary disease but a number of medicines may provide some relief. These medicines can include autibiotics and steroids. Newer drugs include Spiriva* and Combivent* with combined 2005 sales of US\$1.9 billion.⁴ Some people with more advanced disease need to use oxygen while those with very scrious chronic obstructive pulmonary disease might have surgery to remove the affected part of the lung or a lang transplant.

Multiple Scierosis

Multiple sclerosis afflicts an estimated 2.5 million people worldwide, with nearly half a million in North America and 400.000 in Europe. It is an autoimmane disease in which the body's own intimum system attacks the motective myelin sheaft of the nerve fibres in the central nervous system. Without myelin, the nerves cannot conduct impulses and communicate with other nerves and sufferers initially experience degrees of disability and loas of control of body functions. It is a progressive disease affecting the nervous system over many years eventually leading to severe incapacitation.

There is no known cure for multiple acterosis. However, interventions can be made to reduce the frequency and severity of flare-ups (called relapses). There have been few ue month available for the chronic progressive form of the disease, while sales of drugs by the relansing remitting form, which is found in approximately 50% of multiple scleresis sufferers, exceeded USS6.0 billion in $2005$ ³ Steroids are currently used to inprove symptoms of acute attack but flase have no kons-term benefits and cause. significant side-effects. Therefore, current research is being focussed on modifying the nathological mocesses of the disease itself, generally by means of inhibiting the body's destruction of myclin streath and the ensative nerve darnage.

Of the recently approved agents, three are beta interferons (Hetaseron $^\circ$ (Hetaferon $^\circ$ , Chirea Corporation; Avonex^®, Biogen IDEC; and Rebit^®, Serono Laboratories). A fourth product, Copaxone,⁸, Teva Pharmaceutical, also reduces the severity of attacks. While its efficacy in comparison to beta interferons is still being debated, it does not have the same side-effects and so is a sreferred long-term treatment. Its mode of action has not been fully clucidated but it is known to induce a class of immune cells. known to be deficient in multiple sclerosis, which competitively inhibit the effect of myelin destroying proteins.

On June 5, 2006, the US Food and Drug Administration (FDA) cave approval for the reintroduction of Tysabri^* (Biogen IDEC, Etan) as monotherapy treatment for relapsing
forms of multiple sclerosis. The product, which costs in excess of US\$2,000 per month of treatment, had earlier been withdrawn due to a risk of progressive multificeal icakoencerdadorativ, an opportunistic viral infection of the brain that usually leads to death or severe disability.

The cost per rationt per year for these drugs in the UK and USA are about US\$12.000 fer Avonex^*, US\$10,000 ~ \$13,000 for Detaferon^*, US\$8,000 ~ \$11,000 fer $Conexone^*$ and US\$10.600 $-$ \$15.000 for Rebit^*.

Iste Awww.lysabri.com/

Colorectal Career

Colorectal cancer is second only to ling cancer in causing cancer-related deaths in western societies. There were about 148,300 new cases diagnosed in the USA and 56.600 deaths from colorectal cancer in 2002. Survival rates are higher if the cancer is detected early. Treatment depends on stage and location of the turnour and may involve surgery, radiation and chemotherany.

Global sales of cancer drugs in 2005 were US\$23.5 billion of which US\$4.878 billion were for coloreetal cancer. The main drags used for treating coloreetal cancer were Elosatin^® (a olatimum derivative). Camptoan^® (an enzyme inhibitor) and the monaclonal antibody, Avastin³.

The selling prices of newer cancer treatments has attracted mach attention lately. ImClone's Erbusix." for colon cuscer costs US\$17.000 a month and Avastin." costs US\$4,400 a month. Zevalin for a rare form of lymphoma costs US\$24,600 a month. Hercegin^* cast over US\$35,000 per coarse. Generally, most cancer treatments now cost in excess of US\$10,000 ner course.

Antibody Therapeutics

Antibodies as sharmaceutical agents is a rapidly emerging field that has seen great clinical success over recent years. As a result, antibodies are quickly becoming a centrepiece of the biotherapeutics arena.

Protein-based therapeutics account for the great majority of biopharmaceutical revenues, but monoclonal antibodies have, according to Decision Resources², become. "The single most dynamic sector in commercial pharmaceutical biotechnology," In 1998, a global industry survey identified agreedmately 700 antibodies from over 260 companies that are in development or on the market for virtually every fatal or debilitating disease, with about a third of these targeting cancers.

The ability of the body to counteract invading organisms and foreign substances is, in part, mediated by antibodies. In producing an immune response, the body generates a vast array of antibodics with difficring properties designed to maximise their neutralising effect. The use of antibodies as therapeutic agents is best served by a single molecule of defined specificity, and these are referred to as monoclough antibodies. The ability to "create" monoclonal antibodies was discovered in 1975 and for many vears they were always produced as mouse antibodies because the procedures to make them could not be replicated in humans. Administration to humans of mause antibodies causes an immane response which can neutralise the intended effects of the authority and cause illness to the recipient. More recently, however, including the been developed to combine the active region from a mouse antibody with the constant region of a human anibody, referred to as chimaeric amibodies. Other techniques have been developed, same by Zenvih's partners, to transform mouse antibodies to human (humanised antibodies) or to produce fully human antibodies.

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It is the ability to produce haman or humanised monoclosal antibodies that has lead to the resurgence in interest in their use as themportic agents. These antibodies can be produced to be highly selective for a particular target with the consequence that they will neutralise the target or block its action by binding to a receptor.

Another recent turget for biotechnology has been the cytokines of which more than 150 have now been identified. Cytokines are signalling proteins that, like hormones, provide cell to cell communication. The inhibition of cytokine activity has proven highly successful for a number of disease states including artigitis. Zenyth's research centres around the development of antibodies to cytokines or their cell receptors as well as the development of other techniques for blocking evinking activity.

Antibody products have proved to be highly successful and profitable therapeatics. They are well accepted by patients and physicians. As a result, products sach as Rituxan^*, Remicade^*, Humin^*, Hercegain^* and others combined for sales of over US\$10 billion in 2004.

By 2010 the market for antibody therapeutics is projected to be well over US\$30 billion.⁸ This rapid growth has not escaped the notice of major pharmaceutical companies, which are now actively investing in antibody-focased R&D to bring new antibody therapeuties to market,

PDL BioPharma (svevičasly Protein Design Laboratories). Abgenix (acquired by Amzes in 2005 for US\$2.2 bil), CAT (now part of AstraZeneca). Genericch and Medarea are considered the dominant players in development of monoclonal antibodybased therapentics. These companies have developed methods for producing humanised and fully human antibodies, and each of these companies has strong and relatively clear-cat intellectual property nositions for its antibody development messialities

Other companies active in antibody development include: Amaen, Micromet, Alexion, Xoma, Tanox, Seattle Genetics, Dyax, Genmab and Morphosys.

Expected Cash Flows

The Zenyth projects are all "in-process" in that further research is required before the proposed products can be administered to humans and protracted clinical trials are reaning before marketing approvals can be obtained. In some cases, the definitive or preferred antibody product has not been decided. In all cases, proof that an effective and safe therapy is achievable has not been shown. This is both a weakness, in that the ability to treat the disease is unknown, and a stormal bocause no existing drug is based on the hypothesis and the proposed drug may be unique in the marketplace. Hence, all projects have considerable inherent R&D risk before a produst can be launched.

Morrelesså Authorb Thermies: Exolving into a £30 billion market. Datamonitor, Amil 15, 2005.

To assist Deloitte Corporate Finance Limited in determining the value of intellectual property owned by Zenyth Corporation, Acuity has prepared financial models of expected cash flows for each of the projects currently under active development by the Company. Expected cash flows are defined as the difference between income and experses as may occur if everything went to plan which have been probability adjusted to reflect the likelihoods of successfully completing the specific R&D phases and realising the potential sales and expenses.

Valuing in-process R&D on the basis of expected cash flows is common and accepted practice in the pharmaceutical industry.

Expected revenues are based on:

an assessment of markets for the proposed products deriving from incidence and prevalence data.
a market share estimate deriving from knowledge that blockbuster drugs achieve majority market share and tempered by the fact that in all targeted indications there are many drugs under development with the potential to be market leader, and
a selling price based on existing antibody treatments or biotherapeutics.

For each project, milestone receipts and royalties are as stipulated in current agreements, less rovalties pavable to collaborators, or are based on industry averages.

The market is based on estimated incidences of the particular disease states in the USA factored up by 50% to include the rest of the world on the basis that the US is currently the largest market for expensive antibody therapies.

Expenses on individual projects are obtained from Zenyth budgets for the current year, and in some cases subsequent vears, which we believe adequately reflects requirements for the achievement of research objectives and complies with commitments under existing agreements. Corporate overheads are apportioned across projects relative to the anticipated research spending on each. Longer term expenses are based on industry averages, for example estimates of costs for animal studies and estimates of patient nambers required for clinical trials multiplied by average costs per patient.

Phase transitional probabilities derive from published data on antibody success rates and our own risk assessment particularly for the initial discovery and pre-clinical development stages. One source of such data is from the Tufts University Centre for the Study of Drug Development in the USA which has analysed successes in bringing antibody therapies to market.⁹ Tufts report an average likelihood for humanised antibodies of completing Phase I to approval of 18%. Considered risk factors also include:

consideration of patent granting where patents are still in a provisional or pending stage.
R&D risk associated with discovery and candidate selection,
risk associated with proposed mechanism of action (namely, has it been proven that the proposed receptor blocking will alter the course of the disease), and

$^*$ JM Reichert, et al. Monochuml Antibody Successes in the Clinic. Nature Biotech 23(9):1073, 2605.

the strength of technical and commercial expertise and financial viability of the partner company.

The life of cash flows is considered to be to the expiry of the most recently applied for patent. Although it is likely that products will continue to be sold beyond the patents' lives it is usual for heensing agreements to stipulate payment of royalties only during the term of patents.

Acuity also provided Deloitte Corporate Finance with information on expectations about possible variations in the arricunt and timing of those expected cash flows to assist with the preparation of sensitivity analyses.

Table 2 summarises the main assumptions in the financial models prepared for Deloitte Corporate Finance:

Project	Product. Laurech	Patient Pop'n at lammeh.	Market Peact"n	Estimated Wholesale Price USS	Peak Sales US\$	Cumulative Probability $\mathcal{V}_{\rm{IR}}$
LI3Rad asthma	2044	1.7m	li⊮⁄s	11.000	2.000m	16.1%
IL13Red COPD	2018	3.Üm	10%	11.000	3.300am	7.7%
GM-CSFRa RA	2014	360,000	1.49 ₇₀	14.000	Gilfken	14.6%
GM-CSFRaMS	2019	400.000	10%	11.000	500au	0.5%
G-CSF COPD	2018	X.9m	15%	11.000	5.00km	4.5%
G-CSF RA	2019	4(影高田)	15%	14. (KX)	750m	6.1%
VEGE-B RA	2016	380.000	13%	[4. (K))	90m	10.2%
VEGF-B Cancer	2018	《实验》	15%	35.000	1.FUtan	毒瘤病

Table 2: Assumptions used in Financial Models

Oual/Reations & Declarations

Acuity is a consultancy firm that advises on R&D and its commercialisation with a particular emphasis on healthcare and biotechnology. Acuity undertakes technology and market assessments of projects and provides advice to the developers of high technology products and processes on intellectual property protection and commercialisation. The author of this report, Dr David Randerson, has over 30 years experience as a practicing biomedical engineer and research adviser. He has managed commercial and academic research programs, taught science and engineering at terliary institutes and worked in the medical device and pharmaceutical industries.

The financial modelling makes certain assumptions in relation to the revenue prospects. The projections derive, in part, from information that we have obtained from Zenyth, a

number of publicly available sources and our own judgement in relation to projections based on this information.

In presenting these figures, we are making no representation that further research and develomment will be successful, or that market growth and renetration will be realised. We consider that the projections are based on reasonable assumptions with regards to the markets and that, following adjustment for risk, provide a sound basis for the preparation of a valuation.

Neither Acuity nor its mineiral has any poseminy interest in Zenyth or CSL that could be recarded as affecting the ability to provide an unbiased opinion of the matters comained in this report. Acuity will receive a professional fee for the preparation of this report.

This report was submitted in draft form to Zenyth for comment on factual accuracy prior to finalisation.

We have given our written consent to the issue of this report as part of Deloitte Corporate Finance's independent expert's report to be included in the Explanatory Bookket to be provided to Zenyth shareholders and option holders in relation to the proposed acquisition of shares by CSL Limited and the groposed cancellation of options.

Yours sincerely

David H Randerson, BE, PhD, FAICD Masaging Director

Dellite

Appendix 6: Sources of information

In preparing this regort we have had access to the following principal sources of information:

The report dated 24 August 2006 prepared by Accity Technology Management Ptv Ltd. ä. which is attached as Appendix 5
research from the US Urgaritment of Health and Human Resources, the American Cancer Society, the Medical Research Institute of New Zealand, Nature, ING Financial Markets and 1X18 securities
financial accounts and other information in relation to Zenyth
publicly available industry information published by IBISWorld Pty Limited, Australian Bureau of Statistics, etc.
milich svalable häberation on comparable corporáss and comparable transactions mblished by ASIC. Thempson research, OneSaurre, AGSM Risk Management Service. Bloomberg Financial markets and SDC Platinum
other publicly available information, ASX announcements, media releases and brokers ù. reports on Zenyth, CSL and the industries in which they operate.

In addition, we have had discussions and convertiondence with certain directors and executives from Zenyth in relation to the shove information and to current operations and prespects.

m Deloille: Zageh Therapeutos Limited -- Independent Expert's Report

Dalawa,

Appendix 7: Qualifications, declarations and consents

The report has been prepared at the request of the Directors of Zenyth and is to be included in the Explanatory Bookket to be given to Sharcholders for approval of the Proposal and Option Scheme in accordance with Section 640. Accordingly, it has been prepared only for the benefit of the Directors and those persons entitled to receive the Explanatory Booklet in their assessment of the Proposed Scheme outlined in the centri and should not he used for any other parrose. Further, recipients of this report should be aware that it has been prepared without taking account of their individual objectives, financial situation or needs. Accordingly, each recipient should consider these factors before acting on the Proposal and Orássa Scheme.

The renort represents soldly the expression by Dictointe of its opinion as to whether the Proposal and the Option Scheme is in the best interest of the Shareholders or Optionholders as a whole. Defoitte consents to this report being included in the Explanatory Bookket.

Systements and oniments contained in this renort are aiven in good faith but, in the prenaration. of this report. Defects has relied upon the information provided by the directors and executives of Zenyth which Delaine believes, on reasonable grounds, to be reliable, complete and not misleading. Deloitte does not imply, nor should it be construct, that it has carried out any form of sadd or verification on the information and records samtled to as. Drafts of our renort were issued to Zeavth management for confirmation of factual accuracy.

Furthermore, recognising that Deloitte may rely on information provided by Zenyth and its officers and/or associates. Zenyth has agreed to make no claim against Deksite to recover any less or damage which Zenvih may suffer as a result of that reliance and also has agreed to indemaify Deloitte seuinst any citim arising out of the assignment to give this report, except where the canin has irresen as a result of any proven withd misconduct by Deloitte.

Detaine has relied upon the report prepared by Acuity. Delaine has received consent from Aucity for reliance in the preparation of this report.

To the extent that this report refers to prospective financial information we have considered the prespective financial information and the basis of the underlying assumptions. The procedures involved in Deboitte's consideration of this information consisted of enoughes of Zenvih personnel and analytical proceduces applied to the financial data. These procedures nraf eragirles dåt ned include verification work nor constitute an atalit in secocioners ofth Australian Auditine Standards, nor the they constitute a review in accordance with AUS 962 ambicable to review procedures.

Based on these procedures and enquiries. Deloitte considers that there are ressonable grounds to believe that the prospective financial information for Zenvih included in this report has been prepared on a reasonable basis. In relation to the prospective financial information, actual results may be different from the prospective financial information of Zenyth referred to in this report since anticipated events frequently do not occur as expected and the variation may be material. The achievement of the prospective financial information is dependent on the outcome of the assumptions. Accordingly, we express no opinion as to whether the mospective financial information will be achieved.

学賞 Deloitte: Zervth Therareules Limited -- Independent Expert's Report

Delota

Detoitte holds the appropriate AFSL to issue this cepart and is owned by the Australian Partnership Deloitte Touche Tolmatsu. The employees of Deloitte principally involved in the preparation of this report were Hamish Blair B.Comm (Hous), M.Com, CA, F FINSIA, .
Stephen Reid, Director, M App. Fin. Inv., B.Ec., F FINSIA, CA, Garrick Rollason, Manager, $B.A.$ B.Comm, ACA. Each links many years experience in the provision of corporate financial advice, including specific advice on valuations, mergers and acquisitions, as well as the neconotion of expert reports.

A Director of Zenyth, Mr James McKenzie acts as a consultant to Deloitie Touche Tohoutsa. and receives a fixed consulting fee which is not dependent on referring potential clients to us.

Neither Delaitte, Delaitte Teuche Tolmatat, nor my partner or executive or employee. thereof has any financial interest in the outcome of the proposed transnotion which could be considered to affect our ability to reader an unbiased opinion in this report. Deloitte will recive a fee of \$125,000 exclusive of GST in relation to the preparation of this report (including lees payable to Acuity). This fee is based upon time spent at our normal hourly rates and is not contingent upon the success or otherwise of the Proposed Scheme.

Dehita

Afrant Belakte

'Deferite' refers to the Australian normership of Deloitte Touche Tolumatau and its subsidiaries. Deboltte, one of Anstralia's feading professional services firms, provides andit, tax, consulting, and fausacial advisory services through azonial 3000 people accoss the country. Facused on the creation of value and growth, and known as an employer of choice for innovative human resources programs, we are dedicated to helping our clients and our people excel. For more information, please visit Deloitte's web site at www.deloitte.com.au.

Defolue is a member of Deloitte Touche Tolymutsu in Swiss Verein, As a Swiss Verein (association), neither Dekoite Touche Tobrnatsu nor any of its member firms has any liability for each other's acts or outissions. Each of the member firms is a semmate and independent icgal entity operating ander the names "Deloitte," "Deloitte & Twache," "Deloitte Tonche Tolenasia," or other, related names. Services are provided by the member firms or their setsidiaries and affiliates and not by the Unionte Touche Tolumatar Verein.

Liability limited by a scheme againved make Professional Standards Legislation.

Confidential - this document and the information contained in it are confidential and should not be used or disclosed in any way without our arior consent.

ŴĎ

Detailte: Zerve Theraneutes Limited -- Independent Expert's Report

Section 17 - Glossary

The following terms ased in this Explanatory Booklet (including the notices of meeting in Section 30, Section 11 and Section 32) have the meanings given to them below, unless the context otherwise requires.

AEST

Australian Eastern Standard Time.

ASIC

Australian Securities and Investments Commission

ASX

Australian Stock Exchange Limited ACN 008 624 691 or, as the context requires, the financial market conducted by it.

AVX754 (apricitabine)

Avexa's lead product candidate, a nucleoside reverse transcriptase inhibitor currently in Phase IIb for the treatment of HIV infection.

AstraZeneca

AstraZeneca UK Limited with corporate headquarters in London, United Kingdom and R & D headquarters in Sodertalle, Sweden.

Australian Research Council (ARC)

An independent body established by the Australian Government under the Aastralian Research Council Act 2001 to foster excellence, partnerships and the highest ethical standards in research and research training in all fields of science, social sciences and the hemanities

Avastin^®

A registered trademark of Genentech, Inc. and F. Hoffmann-La-Roche AG.

Avexa

Avexa Limited ACN 108 150 750.

Avexa Share A fully paid ordinary share in the capital of Avexa.

Avexa Share Register

The register of members of Avexa maintained in accordance with section 168(1) of the Corporations Act.

Business Day

A weekday on which Australian banks are open for business in Melbourne, Australia.

CAM-3001

The lead antibody against GM-CSFR& being developed by Zenyth and CAT.

CAT

Cambridge Antibody Technology Limited, a subsidiary of AstraZeneca in the United Kingdom.

CGT Capital gains tax.

CHESS

The Clearing House Electronic Sub-register System for the electronic securities operated by ASX Settlement and Transfer Corporation Pty Limited ABN 49 008 504 532.

COPD

Chronic obstructive pulmonary disease.

CSIRO

Australia's Commonwealth Scientific and Industrial Research Organisation.

Close of Trading

Close of trading on ASX on the Effective Date.

Combivir^®

A registered trademark of Glaxo Group Limited.

Computershare

Computershare Investor Services Pty Limited ACN 005 485 825.

Corporations Act

The Corporations Act 2001 (Cth).

Court The Supreme Court of Victoria.

CSL. CSL Limited ACN 051 588 348.

CSL Acquisition Proposal

The proposed acquisition of Zenyth by CSL parsuant to the Share Scheme. (The CSL Acquisition Proposal also incorporates the Special Distribution and the Option Scheme but is not conditional on the approval of either of these ancillary transactions).

CSL Information

The information prepared by CSL for inclusion in Section 5 of this Explanatory Booklet and for which CSL is solely responsible.

DNA

Deoxyribonucleic acid.

Deed Poll

The deed poll executed by CSL on 6 September 2006 for the benefit of Scheme Shareholders in which CSL acknowledges and confirms its obligation to pay the Share Scheme Consideration. A copy of the executed Deed Poll is reproduced in Section 15 of this Explanatory Booklet.

Director

A director of Zenyth (the Directors as at the date of this Explanatory Booklet are the persons specified in Sections 2.2 and $9.3$

Dollar or \$

The lawful currency for the time being of the Commonwealth of Aastralia.

Dyax

Dyax Corp., with corporate headquarters in Cambridge, Massachusetts, United States of America.

EGF

Epidermal growth factor.

EGFR

The epidermal growth factor receptor.

EGFR501

The truncated form of EGFR under evaluation by Zenyth and its collaborators, CSIRO and LICR.

Effective

When used in relation to a Scherne, the coming into effect, parsuant to section 411(10) of the Corporations Act, of the order of the Court approving the Scheme under section 411(4)(b) of the Corporations Act.

Effective Date

When used in relation to a Scheme, the date on which the order of the Court approving the Scheme under section 411(4)(b) of the Corporations Act comes into effect pursuant to section 411(10) of the Corporations Act.

Enbre!"

A registered trademark of Immunex Corporation (now Amgen) and Wyeth, a Delaware corporation.

Epivir*

A registered trademark of Glaxo Group Limited.

Excluded Share

Any Zenyth Share held by or on behalf of for the benefit of CSL or any of its related entities.

Explanatory Booklet

This explanatory booklet dated 21 September 2006 in relation to the CSE Acquisition Proposal.

FDA

The United States of America Food and Drug Administration.

Foreian Scheme Shareholder

A Scheme Shareholder whose address in the Zenyth Share Register is a place outside Australia and its external territories. or New Zealand.

G-CSE

Grasułocyte colony stimulating factor.

GM-CSF

Granulocyte-macrophage colony stimulating factor.

GM-CSFRa

The granulocyte-macrophage colony stimulating factor receptor alpha subunit.

Genentech

Geneatech, Iac. with Corporate Headquarters in South San-Francisco, California, United States of America.

General Meeting

The general meeting of Zenyth Shareholders to be held on 23 October 2006 to consider and vote on the Special Distribution Resolution. The notice converting the General Meeting is set. out in Section 11 of this Explanatory Booklet.

HIV

Human immunodeficiency virus.

Holder of a Non-Marketable Parcel

A Scheme Shareholder whose entitlement to participate in the Special Distribution would cause that Scheme Shareholder to receive a transfer of Avexa Shares that would result in that Scheme Shareholder holding less than a marketable parcel as defined in the ASX Listing Rules.

Section 17 - Glossary continued

Humira®

A registered trademark of Abbott Laboratories.

$H = 1.3$ Interleukin-13.

IL-13R The interleukin-13 receptor.

$H = 13Rn1$ The interleukin-13 receptor alpha-1 subunit.

扎-4 Interleukin-4.

IND Investigational new drug

Implementation Date

The date that the CSL Acquisition Proposal is to be implemented according to its terms. The Implementation Date is expected to be on about 10 November 2006.

Implied Value

The implied value of the Total Consideration at any given date.

The Implied Value as at 4 September 2006 is \$0.855 per Zenyth Share, calculated as follows: \$0.82 Share Scheme Consideration plus \$0.035, representing the implied value of the Special Distribution as at 4 September 2006. The closing price of Avexa Shares on 4 September 2006 was \$0.21, giving a market value of \$4.4 million for Zenyth's holding of 21,062,000 Avexa Shares. As at 4 September 2006, this equates to approximately \$0.035 per Zenyth Share for the 125.2 million Zenyth Shares on issue.

Income Tax Assessment Act

The Income Tax Assessment Act 1997 (Cth).

Independent Expert or Deloitte

Deloitte Corporate Finance Pty Limited ACN 003 833 127. of 180 Lonsdale Street. Melbourne Victoria 3001.

Independent Expert's Report

The report of the Independent Expert expressing an opinion. on whether the Share Scherne and the Special Distribution. are in the best interest of Scheme Shareholders and whether the Option Scheme is in the best interest of Optionholders. The Independent Expert's Report is set out in Section 16 of this Explanatory Booklet.

Ineligible Scheme Shareholder

For the purpose of participating in the Special Distribution, a Holder of a Non-Marketable Parcel or a Foreign Scheme Shareholder.

July 2006 Management Options

1.000,000 options to acquire by way of issue a like number of Zenyth Shares issued by the Company in July 2006 to certain senior executives of Zenyth, exercisable at \$0.62 and otherwise issued in accordance with the Zenyth Option Plan.

LICR

The Eudwig Institute for Cancer Research with nine branches globally including one in Melbourne, Australia.

Listing Rules

The listing rules of ASX.

MK-6105

The lead antibody against (L-13Ra1 being developed by Zenyth and Merck.

MNLpharma

A privately held drug discovery and development company with its commercial office in Reading, United Kingdom.

Medarex

Medarex, lac. with corporate headquarters in Princeton, New Jersey, Usited States of America.

Merck

Merck & Co., Inc. with global headquarters in Waitehouse. Station, New Jersey, USA.

Merger Implementation Deed

The deed between CSL and Zenyth dated 17 July 2006 ander which each party undertakes specific obligations to give effect. to the CSL Acquisition Proposal. The Merger Implementation Deed (without schedules) is reproduced in Section 15 of this Explanatory Booklet.

Methicillin

The generic name of a parrow spectrum beta-lactam antibiotic used to treat infections caused by susceptible Gram-positive bacteria, particularly beta-lactamase-producing organisms such as Staphylococcus aureus that would otherwise be resistant to most penicillins.

MuriGen

MuriGen Pty Ltd ACN 089 736 434.

MRTIS

Nucleoside reverse transcriptase inhibitors.

National Health and Medical Research Council (NHMRC)

An Australian Government body that promotes the development and maintenance of public and individual health standards by providing research funding and advice.

Nominee

Merrill Lynch Equities (Australia) Limited, being the personnominated by Zenyth to sell or facilitate the transfer of the Avexa Shares attributable to Ineligible Scheme Shareholders, on behalf of the Ineligible Scheme Shareholders, under the terms of the Share Scheme and the Special Distribution.

Option Scheme

The proposed creditors' scheme of arrangement under Part 5.1 of the Corporations Act between Zenyth and its Optionholders, subject to any modifications or conditions made or required by the Court pursuant to section 411(6) of the Corporations Act and approved by Zenyth.

Option Scheme Consideration

the consideration payable to Scheme Optionholders for the cancellation of their Options, as set out in Section 2.4(b).

Option Scheme Meeting

The meeting ordered by the Court to be convened pursuant to section 411(1) of the Corporations Act in respect of the Option Scheme. The notice convening the Option Scheme Meeting is set out in Section 12 of this Explanatory Booklet.

Option Scheme Record Date

The date for determining entitlements to the Option Scheme Consideration, being 5.00pm (AEST) on the third Business Day (or such as other Business Day as Zenyth and CSL agree) following the date on which the Obtion Scheme becomes Effective. The Option Scheme Record Date is expected to be 5.00pm (AEST). on 3 November 2006.

Phace display library

Dyax's proprietary fruman antibody phage library which is used to identify high-affinity human antibodies against a certain target.

PhytoPure library

MNLpharma's proprietary collection of more than 2.000. non-imine sugar compounds.

Quit Date

17 November 2006 or such later date as CSL and Zeayth agree in writing.

R&D

Research and development.

RA

Rheumatoid arthritis.

Remiesde®

A registered trademark of Centocor Inc., a Pennsylvania corporation. United States of America.

Remodelling

The changes in tissues (e.g. airways) caused by inflammatory processes underlying diseases such as COPD and asthma.

SOCS

Suppressors of Cytokine Signalling.

S. aureus

Staphylococcas aureus.

Schemes

The Share Scheme and the Option Scheme or either of them as the context requires.

Scheme Optionholder

A Zenyth Optionholder as at the Option Scheme Record Date.

Scheme Share

A Zenyth Share on issue as at the Share Scheme Record Date, other than an Excluded Share.

Scheme Shareholder

A Zenyth Shareholder as at the Share Scheme Record Date.

Section

A section of this Explanatory Booklet.

Shanghai Institute of Organic Chemistry

The Shanghai Institute of Organic Chemistry (SIOC), Chinese Academy of Sciences (CAS) in Shanghai, China.

Section 17 - Glossary continued

Share Scheme

The proposed members' scheme of arrangement between Zenyth and its Shareholders under Part 5.1 of the Corporations Act to give effect to the merger of Zenyth with and into CSL, as set out in Section 13 of this Explanatory Booklet, subject to any modifications or conditions made or required by the Court under section 411(6) of the Corporations Act and approved by Zenyth and CSL.

Share Scherne Consideration

An amount of \$0.82 cash per Scheme Share.

Share Scheme Meeting

The meeting of Zenyth Shareholders to be held on 23 October 2006 to consider and vote on the Share Scheme. The notice convening the Share Scheme Meeting is contained in Section 10 of this Explanatory Booklet.

Share Scheme Record Date

The date for determining entitlements to the Share Scheme Consideration and the Special Distribution, being 5.00pm (AEST) on the fifth Business Day (or such as other Business Day as Zenyth and CSL agree) following the date on which the Share Scheme becomes Effective. The Share Scheme Record Date is expected to be 5.00pm (AEST) on 7 November 2006.

Shire Pharmaceuticals Group Plc.

A global specialty pharmaceusical company with its Head Office in Hampshire, United Kingdom.

Special Distribution

the proposed in specie distribution to be made by Zenyth to Scheme Shareholders of all of the Avexa Shares registered in the name of Zenyth as at the Share Scheme Record Date, subject to and in accordance with the Special Distribution Resolution and the Share Scheme.

Special Distribution Resolution

The proposed ordinary resolution to approve the Special Distribution, as set out in the notice of deneral meeting and contained in Section 11 of this Explanatory Booklet.

TNF

Turnour necrosis factor

Takeovers Panel

The government audiority vested with the power ander Chapter 6, Part 6.10 (Division 2) of the Corporations Act to review the exercise of ASIC's exemption or modification powers ander the Corporations Act and to declare circumstances in relation to the affairs of a company to be unacceptable.

Tipranavir

The generic name for Aptivas², a protease inhibitor that is ased to treat adults with HIV, marketed by Boehringer Ingelheim. Pharmaceuticals, Inc.

Total Consideration

The aggregate value of the Share Scheme Consideration and the Special Distribution.

UltiMAb

A trademark of Medarex, Inc. and refers to Medarex's proprietary haman antibody development system.

VFGF-A

Vascalar eadothelial growth factor-A.

VEGF-B

Vascalar eadothelial growth factor-8.

Vancomycin

the generic name of an antibiotic commonly used to treat serious. infections caused by Gram-positive bacteria.

Videx^®

A registered trademark of Bristol-Myers Squibb Company.

Voting Entitlement Time

The time for determining eligibility of: (a) Zenyth Shareholders to vote on the Share Scheme at the Share Scheme Meeting and on the Special Distribution Resolution at the General Meeting; and (b) Zenyth Optionholders to vote on the Option Scheme at the Option Scheme Meeting, being in each case 7.00pm (AEST). on 21 October 2006.

Zenyth or Company

Zenyth Therapeutics Limited ACN 006 614 375.

Zenyth Board or Board

The Board of Directors of Zenyth as at the date of this Explanatory Booklet.

Zenyth Group Zenyth and its subsidiaries.

Zenyth Option or Option

An option to acquire by way of issue a Zenyth Share issued ander the Zeayth Option Plan, other than a July 2006. Management Option.

Zenyth Optionholder or Optionholder

Any person who is registered in the Zenyth Option Register as the holder of a Zenyth Option.

Zenyth Option Plan The Zenyth Key Employee Share Option Plan.

Zenyth Options Register

The register of holders of Zenvth Options maintained by or on behalf of Zenyth in accordance with section 168(1) of the Corporations Act.

Zenyth Security or Security

A Zenyth Share or a Zenyth Option.

Zenyth Security Holder

A Zenyth Shareholder and/or Zenyth Optionholder.

Zenyth Share or Share

A fally paid issued ordinary share in the share capital of Zenyth.

Zenyth Shareholder or Shareholder.

A person registered on the Zenyth Share Register as a member of Zenyth.

Zenyth Share Register

The register of members of Zenyth maintained by or on behalf of Zeayth in accordance with section 168(1) of the Corporations Act.

Zenyth Share Registry

Computershare Investor Services Pty Limited ACN 005 485 825 Yarra Falls, 452 Johnston Street, Abbotsford, Victoria, Australia, 3067.

Zerit*

A registered trademark of Bristol-Myers Squibb Company.

This page has been left blank intentionally.

Corporate Directory

Zenyth Therapeutics Limited

ACN 006 614 375

Registered Office

576 Swan Street, Richmond Victoria Australia 3121 Telephone (61-3) 9208-4000 Facsimile (61-3) 9208-4356

Legal Adviser to Zenyth

Minter Ellison Rialto, Level 23 525 Collins Street, Melbourne Victoria Australia 3000

Share Registry

Computershare lavestor Services Pty Limited Yarra Falls 452 Johnston Street, Abbotsford Victoria Australia 3067 Toil free number (within Australia) 1300 850 505 Telephone (61-3) 9415-5000

Taxation Adviser to Zenyth

KPMG 161 Collins Street, Melbourne Victoria Australia 3000

Independent Expert

Deloitte Corporate Finance Pty Limited 180 Lonsdale Street, Melbourne Victoria Australia 3001

Zenyth Therapeutics Limited
ACN 006 614 375

576 Swan Street, Richmond
Victoria Australia 3121

Telephone (61 3) 9208 4000
Facsimile (61 3) 9208 4356

AI assistant

CSL Ltd. — Proxy Solicitation & Information Statement 2006

17854_rns_2006-09-18_0941d9b3-ba79-4d27-9293-98522ae2bede.pdf

CSL Acquisition Proposal Explanatory Booklet

Important Notices

General

Defined Terms

Purposes of this Explanatory Booklet

ASIC, ASX and the Court

Input From Other Parties

Investment Decisions

Forward Looking Statements

Contents

Important Dates and Times

Letter From the Chairman of Zenyth Therapeutics Limited

Letter From the Chairman of Zenyth Therapeutics Limited continued

Key Reasons to Vote in Favour of the CSL Acquisition Proposal

Zenyth Shareholders

Zenyth Optionholders

Section 1 - Summary of the CSL Acquisition Proposal

1.1 Introduction

1.2 What You Will Receive

(a) Zenyth Shareholders

(b) Zenyth Optionholders

1.3 Directors' Recommendations and Intentions

1.4 Inter-relationship Between Share Scheme. Special Distribution and Option Scheme

1.5 Key Conditions

Section 1 - Summary of the CSL Acquisition Proposal continued

1.6 Implementation and Timetable

1.7 The CSL Acquisition Proposal - Your Questions Answered

When will I be paid for my Zenyth Securities?

Will I be offered an opportunity to invest in CSL?

When will I receive the Avexa Shares?

When can I start trading my Avexa Shares on ASX?

Are there any risks for Shareholders if the CSL Acquisition Proposal proceeds?

If I wish to support the CSL Acquisition Proposal, what should Ldo?

What happens if I vote against the Share Scheme? Can I be forced to sell my Zenyth Shares?

What happens if the Share Scheme is not approved?

What are the tax implications of the CSL Acquisition Proposal?

What are my alternatives?

1.8 What To Do Next

· Consider your alternatives

Section 1 - Summary of the CSL Acquisition Proposal continued

• Vote at the Share Scheme Meeting, the General Meeting and the Option Scheme Meeting

1.9 Summary of How to Vote

(a) Three Meetings

(b) Voting in Person

(c) Voting by Proxy

(d) Voting by Attorney

(e) Voting by Corporate Representative

(f) Further Information

Section 2 - Expected Benefits and Other Considerations for Zenyth Security Holders

2.1 Introduction

2.2 Directors' Recommendations and Intentions

2.3 Zenyth Shareholders - Key Reasons for Your Directors' Unanimous Recommendation

(a) Substantial Premium to the Trading Prices of Zenyth Shares Prior to the Announcement of the CSL Acquisition Proposal

(b) Immediate and Certain Fair Value

(c) Zenyth Shareholders Receive Avexa Shares

(d) The Independent Expert has Concluded that the Share Scheme and the Special Distribution are in the best Interests of Zenyth Shareholders

Section 2 - Expected Benefits and Other Considerations for Zenyth Security Holders continued

(e) No More Favourable Proposal Has Emerged

(f) No Brokerage Costs on the Disposal of Zenyth Shares or the Receipt of Avexa Shares

2.4 Zenyth Optionholders - Key Reasons for Your Directors' Unanimous Recommendation

(a) Most Options Substantially 'Out of the Money'

(b) Immediate Value

(c) The Independent Expert has Concluded that the Option Scheme is on Balance in the Best Interests of Zenyth Optionholders as a Whole

2.5 Possible Disadvantages

(a) Loss of Direct Continuing Interest in Zenyth's Business

(b) Volatility in Avexa Share Price

(c) Taxation Consequences

Section 2 - Expected Benefits and Other Considerations for Zenyth Security Holders continued

2.6 Other Relevant Considerations

(a) The Share Scheme is Conditional

(b) Inter-relationship of the Share Scheme, Special Distribution and Option Scheme

(c) Likelihood of a Competing Proposal

(d) All or Nothing Proposal - Zenyth Shareholders

(e) All or Nothing Proposal - Zenyth Optionholders

(f) Risk of Zenyth Share Price Falling if the Share Scheme is Not Approved

(g) Costs

(h) Implications of Not Pursuing the CSL Acquisition Proposal

CSL Ltd. Proxy Solicitation & Information Statement 2006